“More! I want more!”
Well, if you thought the euro might take a break from surging, you were dead wrong because Bullard has given it another excuse to rally, underscoring the notion that the policy divergence between the Fed and the ECB would continue to narrow if he had his way.
Here’s what Jim said in an exclusive interview with MNI:
Not only does St. Louis Federal Reserve Bank President James Bullard say he won’t support more increases in the policy fed funds rate, in an exclusive interview with MNI Tuesday he warns additional hikes may delay when the Fed will hit its 2% inflation target.
“Given the inflation outlook, which has deteriorated in 2017, I would not support further moves in the near term,” Bullard told MNI. “It’s possible data will turn around, but we’ll have to see. I think for now we should remain on pause.”
Furthermore, if the policy rate is raised according to the median forecast of the Federal Open Market Committee, which calls for another rate hike this year and three next year, “I would think of that as unnecessarily aggressive given the data that we have on the economy,” he said. “I think that would probably inhibit inflation from moving towards 2%.”
That was out at 9:15 this morning, so this would mark something of a delayed reaction (of course no one reads MNI, so maybe that accounts for it, although it was on the Terminal about a half hour later), but whatever the case, EURUSD has now climbed to a fresh 30-month high:
Notably, we saw a similar spike in EURCHF around the same time, and while the common currency is giving some back as we speak, this just underscores the fact that it’s looking for excuses to get to 1.20.
******
These guys look at inflation as so important, while it obviates the aphorism that the solution to low prices is low prices. It also leads to very unsophisticated modeling, something dominating the G20. Going back in history: Did Volker solve something, or did he rip the guts out of the economy to curb politically unacceptable inflation? Economics should be about creating incentives to properly deploy human and physical capital. It seems like nobody is really thinking that way. Inflation and its disparate multimarket manifestations is really the wrong thing to obsess about.