Fed's Bullard says no need to panic about stock gyrations

Fed’s Bullard: It’s not surprising to see a volatile stock market

FOX Business’ Edward Lawrence talks to St. Louis Federal Reserve President James Bullard about global growth, the market selloff, the inverted yield curve and consumer spending.

In an exclusive interview with FOX Business, Federal Reserve Bank of St. Louis President James Bullard said that despite the stock market’s wild week of selling, he sees no need to panic about the U.S economy.

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“I don’t think [we need an emergency session],” he told Edward Lawrence. “I think we can act appropriately … What matters is that you're in the right zone for interest rates.”

Investors experienced extreme swings this week, with the  Dow Jones Industrial Average dropping a whopping 800 points on Wednesday, its worst performance of 2019. This as the yield curve, an accurate predictor of recessions, inverted for the first time since 2007.

Even with the selloff, the U.S. economy - in Bullard's view - can keep growing "if we play our cards right," he added.

Elsewhere around the globe, the situation is not as solid, with some investors worried about a global slowdown as China reported weaker-than-expected economic data and Germany’s negative GDP raised the risk of Europe falling into a recession.

FILE- In this Feb. 12, 2019, file photo specialist Patrick King, left, works with traders at his post on the floor of the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EDT on Wednesday, April 10. (AP Photo/Richard Drew, File) (AP Photo/Richard Drew)

“I think we're in the middle of a global slowdown and we're just going to have to assess how this is going to affect the U.S. economy,” Bullard said. But “it's not surprising to see a volatile stock market here, and then in bonds you've got a flight to safety going on is probably driving our yields somewhat lower.

“It's very common [that] the trade war affects companies in the U.S. but it affects people outside the countries outside the U.S. a lot more," he added. "They're wondering what's going to happen. And because of that you create a lot of uncertainty outside the U.S. [and] that drives our yields lower.”

But Bullard notes there’s an upside: Lower rates in the U.S., which means “probably more cars being sold, probably more of more housing than otherwise. So there is a little bit of a silver lining.” Plus, the United States opted to delay tariffs on certain Chinese goods and exempt some from tariffs altogether.

Bullard still sees room for improvement on inflation, though, as he predicts a 1 percent or 1.1 percent inflation over the next five years, while the target is closer to 2 percent: “That’s something I'll definitely take into account if it's sustained going forward going into September … I want to hit the inflation target.”

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The Fed's minutes will be released next week as central bankers head to the annual symposium in Jackson Hole, Wyoming. The central bank's next scheduled meeting is September 17.

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But overall, he concluded, “I think some of this downdraft might be a little bit overdone … The market's way up this year. The fundamentals of the U.S. economy are pretty good.”

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