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Sept. 20, 2019, 4:23 p.m. EDT

Fed’s Bullard: Dissent was due in part to worries about slowing economy

St. Louis Fed president issues statement explaining why he wanted half-point cut.

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By Greg Robb, MarketWatch


Bloomberg Enlarge Image
St. Louis Fed President James Bullard speaking during an early morning television interview at the Jackson Hole summit last month.

St. Louis Fed President James Bullard issued a statement Friday explaining his dissent at this week’s Federal Open Market Committee meeting, saying he wanted a more aggressive half-point cut due to signs the economy is slowing down.

At the end of its two-day meeting, the FOMC voted 7-3 to trim rates by a quarter percentage point to a range between 1.75% and 2%.

Read: Fed remains open to idea of more easing

In his statement, Bullard said a half-point cut would have been a more appropriate action given “signs that the U.S. economic growth is expected to slow in the near horizon.”

“Trade policy uncertainty remains elevated, U.S. manufacturing already appears in recession and many estimates of recession probabilities have risen from low to moderate levels,” Bullard said.

Bullard said the half-point rate cut would have provided insurance against slow economic growth and help move inflation back up to 2%.

“It is prudent risk management, in my view, to cut the policy rate aggressively now and then later increase it should the downside risk not materialize,” Bullard said.

The St. Louis Fed president said he remained “confident” in the Fed’s decision-making.

During his press conference on Wednesday, Fed Chairman Jerome Powell presented a pretty positive outlook.

“We don’t see a recession,” Powell said.

In an interview later Wednesday, Powell’s number two, Richard Clarida, defended the Fed decision to trim rates by a quarter point.

Read: Fed’s Clarida says U.S. economy is fine but global outlook is getting worse

The most likely case is for “continued moderate growth, continued strong labor market, and inflation moving back up to 2%,” he added.

Opinion: In a time of Trump, the Fed doesn’t know what’s going to happen next

U.S. stocks /zigman2/quotes/210598065/realtime DJIA +0.09%  gave up early gains and closed lower on Friday on conflicting reports about the latest U.S. and Chinese trade negotiations.

Economists noted that none of the Fed officials, including Bullard, projected that the central bank’s benchmark rate would fall below 1.5% at any time over the next three years.

“Where was Bullard when we really needed him?” said Alan Ruskin, Deutsche Bank chief international strategist, in an interview on Bloomberg television. “His dots are still not below 1.5%. So he’s got a 50 basis point cut and then that’s sufficient? Well, that doesn’t seem very likely.”

“The more bullish sentiments are something which probably permeates the Fed more than you see in the dots,” Ruskin said. “You have a dove there, but someone who is not really prepared to stick his neck out in terms of some of the longer term thinking. I would have thought the more extreme doves would have had dots at 1% next year, they could have had dots below 1%. That’s perfectly reasonable. It’s reasonable to think that maybe even Fed funds hits zero. There are extreme views out there and Bullard has shown he is really not one of them,” Ruskin said.

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Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.

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