Continuing the policy of increasing short-term interest rates risks the creation of an interest-rate environment next year that in the past signaled weaker economic performance, Federal Reserve Bank of St. Louis President James Bullard said Friday.
Bullard, speaking at the Little Rock Regional Economic Briefing at the Clinton Presidential Center, said the possibility exists of a U.S. Treasury yield curve inversion in 2018 if the Federal Open Market Committee continues its current policy of slowly increasing short-term interest rates.
A yield curve inversion happens when long-term debt has a lower yield than short-term debt.
The yield curve has been flattening since 2014, he said.
"Yield curve is a naturally bearish signal for the economy," Bullard said. "This deserves market and policymaker attention."
Earlier this week, President Donald Trump's pick to lead the Federal Reserve, Jerome Powell, said he expected the central bank to raise interest rates at its next meeting this month, the third increase this year.
Business on 12/02/2017
Print Headline: Fed official warns of interest-rate risk