ST. LOUIS, March 2 (Reuters) - Real interest rates are low and will likely stay that way for a while to come, a top Federal Reserve policymaker said on Wednesday, adding the U.S. central bank will not raise its target rate for a “considerable” time.
“I think real interest rates look low, and look like they’ll continue to be low,” St. Louis Fed President James Bullard told reporters. “But I don’t have a great theory for that.”
Bullard had been asked why the Fed’s policy-setting Federal Open Market Committee said in a statement last month that its key federal funds rate may be kept below normal levels in the longer run.
“There’s just a lower real interest rate environment that’s been going on for a long time and therefore the real component of the federal funds rate will be smaller, and that’s pulling the normal funds rate down,” Bullard, a centrist at the Fed who does not have a vote on policy this year, said in describing his preferred explanation for the low rates environment.
He added however that a formal rate rise by the central bank is “still considerable distance away.”
Reporting by Jonathan Spicer; Editing by Meredith Mazzilli