Fed Bullard says they must take "aggressive" measures to align with markets

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ST. LOUIS, USA (Reuters) – The Fed should lower interest rates by half a percentage point at its meeting in two more weeks, to anticipate market expectations of a cut and a wider trade war, he said Tuesday in an interview on President of the Federal Reserve of St. Louis, James Bullard.

Investors have pushed bond yields to record lows in the past week, leaving the Fed's interest rate seemingly out of line, Bullard said.

In addition, economic data on Tuesday showed that the US manufacturing sector had contracted for the first time in three years, due to a slowdown in global economic growth and as the trade war between Beijing and Washington escalated.

Bullard said he perceived the situation as the equivalent of a "global shock" that justified an "aggressive" step by the Fed at its meeting in two weeks. In July, the Fed reduced the cost of borrowing by a quarter of a percentage point, the first rate drop since 2008.

"We are too high," Bullard said of Fed interest rates, noting that the central bank's current target policy rate between 2% and 2.25% has been higher than the current yield on Treasury securities of U.S.

Typically, the Federal Reserve rate should be a baseline for determining other rates, but even the 30-year bond has fallen below 2%.

(Report by Howard Schneider; Edited in Spanish by Javier López de Lérida)

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