Tumbling inflation expectations in financial markets are becoming “worrisome”, a Federal Reserve interest-rate setter has warned, highlighting the risks to the inflation outlook posed by sliding energy prices.
James Bullard, president of the St Louis Federal Reserve, said lower energy prices were a net positive for the US economy but that declines could mean it would take longer than previously expected for headline inflation to return to the central bank’s 2 per cent target.
His remarks at the Economic Club of Memphis will add to questions over the US interest-rate outlook amid doubts on China’s growth prospects, sharp declines in commodity prices and days of turmoil in global markets. A number of US policymakers have struck a cautious tone this month following the Fed’s landmark quarter-point interest rate increase on December 16.