James Bullard, Interview: CNBC

Fed Funds

“Yeah, I think the 5%, I think we are going to have to get north of 5%. Right now, I’m still at five and three-eighths.”

“Five and three-eighths. So we’ve got a little ways to go here and I’ve argued that, hey, let’s get to where we want to go, and then from there we can see how the data come in. Let’s hope that we get disinflation in 2023. But right now it came in hotter than we thought.”

Recession

Here’s what I think, so I think people have models. They say funds rate or the policy rate has gone up dramatically, therefore there’s going to be a recession. I think you should interpret that cautiously, that kind of thing. Because the first 250 basis points, we started at such a low level, so we started near zero. So the first 250 basis points, that was not restrictive monetary policy. That was just getting back to neutral … (Change of a recession in 2023?) I put a moderately slow growth the last time we did this, and probably this time too, a moderately slow growth scenario with inflation declining.”

Inflation

“If the inflation continues to come down, I think we’ll be fine. Our risk right now is that inflation doesn’t come down or reaccelerates, and then what do we do? We are going to have to move and react in that environment. And if inflation doesn’t start to come down, you know, you risk this replay of the 1970s where you had 15 years where you’re trying to battle the inflation dragon … And you don’t want to get into that … Let’s be sharp now. Let’s get inflation under control in 2023.”

Monetary Policy Lags: “I think this is the age of forward guidance and so the long and variable lags argument doesn’t make as much sense as it made decades ago when Milton Friedman made it. So you’re saying ahead of time, here’s what we’re going to do. Get ready, we’re going to adjust. And I think frankly, I think financial markets did a pretty good job of adjusting and we didn’t get financial crisis or anything like that because we were credible and people saw, okay, we’re going to have to move to take care of this inflation problem and they adjusted appropriately.”