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Fed policy maker warns on low rates stance

"The US Federal Reserve’s plan to keep interest rates low even once the economy is back to normal could risk a policy mistake, a Fed policy maker has warned in an interview with the Financial Times.

"James Bullard, president of the St Louis Fed, said he did not see a persuasive reason to think interest rates should be below their long-run level in 2016, if unemployment and inflation are back to normal.

"His comments highlight divisions on the rate-setting Federal Open Market Committee about the interest rate guidance, adopted in March, with different Fed policy makers giving different reasons to justify it.

“It could lead to a policy that was too low for too long,” said Mr Bullard. “My own dot [interest rate forecast] is at the 4 or 4.25 per cent level because I thought that was the logical thing to say about 2016 at this point.”

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Read full Financial Times article here.

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