James Bullard, Interview: European Economics and Financial Centre Virtual Discussion

“I’m a little skeptical that we’ll get to recession. I think the US economy is slowing, but it’s slowing to the trend pace of growth from a very rapid pace of growth that occurred in 2021. And I think that’s the more likely baseline is that after 5% plus real GDP growth in 2021, now you’ll get something lower for 2022 and it’ll be closer to the 2% trend pays for the US economy.”

“I think that I would now revise up the amount of policy rate moves I’d like to see in 2022. I previously had said that I’d like to see us at 3.5% by the end of the year. I’m now saying that I’d like to see us at 3.75% to 4% at the end of the year. And we do have four meetings, so there’d be a question of how to allocate those policy rate moves over the second half of 2022, but I’m leaving that difficult job up to the chair.”

“And so I think inflation can’t come down relatively quickly to 2%. That doesn’t mean next month, but over the next 18 months, I think inflation could go back to 2% if we play our cards right. And the market-based inflation compensation does seem to indicate that at least for now that markets are confident that this program will end up in a disinflation.”

“But I do think that it probably doesn’t make too much difference to do 100 basis points here and less in the other three meetings of this year or to do 75 basis points here and slightly more in the remaining three meetings of the year.”

“So the economy can grow and prosper in a different rate environment. And I think that’s been lost a little bit. We think that if rates aren’t zero or something that we can’t grow, that’s not true. The historical experience is very different from that, but we do want to get rid of the inflation and we’re going to have to have higher rates to do that.”