James Bullard, Interview: WSJ Live
Fed Funds
‘We put in a dot for the end of 2023 at five and a quarter of 5.5%. So I guess we’re calling it five and three eights, so that would be slightly higher than the median dot.”
“I think the front loading has served us well. I think you should move as rapidly as we can get into this over 5% range, which is basically where the median dot was. And then from there you could say, okay, well you think we have the right level, the policy rate, we think this is putting downward pressure on inflation and we’ll react to data from there.”
“Why not get to the level that you want to be at? Why stall and not quite get to that level? That seems like you’d have risk that inflation would turn around, then you’d have to move more strongly later on in 2023 in order to reestablish the idea that you’re you, you’re going to have a restrictive policy and get inflation back to target. So I think there is something to be said for let’s move the policy rate to the right level, which according to the SEP was over 5%. Let’s do that as quickly as we can and then we’ll see how 2023 unfolds.”
Inflation
“The cause of inflation is ultimately monetary policy that can’t react fast enough or doesn’t do enough to react to shocks that come to the economy.”
Sufficiently Restrictive
‘We’re almost into a zone that you could call restrictive. We’re not quite there yet … And I think you’d probably have to get over 5% to say with a straight face that we’ve got the right level of the policy rate that will continue to push inflation down during 2023.”
Recession / Soft Landing
“So we’ve been surprised to the upside on economic growth GDP now for the fourth quarter, Atlanta Fed still running around 4%. Third quarter came in stronger than expected, so you have a second half growth rate for 2022. That’s quite a bit stronger than most people expected and stronger than the potential growth rate of the US economy. So that’s putting us in better positions starting 2023 than we previously thought is pushing off recession forecasting way into the second half of 2023 and now it’s not all that clear that will even materialize. I think the prospects for a soft landing have improved markedly here.”