December hike may get US rates to neutral setting, Fed’s Bullard says

Trump’s shock win in the US election has not roiled markets as expected and the Fed welcomes a rise in inflation expectations.

London — The dollar strengthened against the rand and other currencies on Wednesday after Federal Reserve Bank of St Louis President James Bullard told a conference in London that US interest rates may rise in December.

"A single policy-rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting," Bullard said.

The jump in the US dollar and government bond yields since last week’s election of Donald Trump to the US presidency remained within the range of the last year, he said.
"Equities and foreign exchange rates have been re-priced, but are well within the experience of the past year," Bullard said.

Trump’s shock win in the US election has not roiled markets as expected and a subsequent rise in inflation expectations is welcomed by its central bank, Bullard said.

"There were a lot of predictions that if the election went the way of Republicans and president-elect Donald Trump then there would be great deal of volatility, but that has not materialised so far," Bullard said.

He added that a rise in inflation expectations was a positive from the Fed’s point of view, given it had previously been concerned about sluggish growth in consumer prices.
Bullard said earlier that one interest rate increase, possibly next month, may be enough to bring US rates to a neutral setting.

by Marc Jones and John Geddie/Reuters