James Bullard, Interview: Bloomberg TV

Banking Crisis

“I do think that the reaction to the banking problems was swift and was appropriate and both here in the U.S. and overseas. I think the idea that there are macroprudential tools that you can use in that kind of situation to calm things down, that seems to have worked so far. You never know if there’s further things happening, but if there are, we can react with macroprudential tools again.”

“Then, on the monetary policy side, we can still proceed to flight inflation and get inflation down during 2023 and 2024 back to target, so I think this idea that you can walk and chew gum at the same time, you’ve got the macroprudential tools for financial stress and you’ve got monetary policy to fight inflation. We can do both, as long as the financial stress doesn’t morph into something much larger, and so far so good. But knock on wood, you’re never sure what’s going to be around the corner.”

Fed Funds

“I think we’ll need to get over 5%. The median person on the committee says a little over 5%. I’m a little higher than that.”

Inflation

“I think inflation will be stickier and I’d look mostly at the core measures of inflation like PCE core inflation or the Dallas Fed Trimmed Mean, which really hasn’t come down very much at all, is still in the 4% range, 4.6 or something like that. We’re still talking about a lot of inflation, more than double our inflation target on that basis, and oil prices fluctuate around. It’s hard to track exactly. Some of that might feed into inflation and make our job a little bit more difficult.”

“It’s a good time to be fighting inflation and trying to get inflation back to target while the labor market is as strong as it is and even workers that get disrupted, hopefully, they’ll be able to find a new job and maybe a better job in this situation.”

Jobs

Regarding Friday’s Jobs Report: “I don’t have a number for you, but anecdotal information seems to indicate that the firms are still scrambling for workers. They’re doing some other things, other strategies that might slow this down a little bit. They’re substituting capital for labor that makes a lot of sense in this situation, but I just think that on the whole, they still need workers.”

Economy

“I put 80% probability that the financial stress will decline and then make that your baseline forecast. I think that’s for low growth, but growth, continued pretty strong labor market and inflation coming down. That’s got 80% probability … the other branch where financial stress gets worse, then we’ll have to bring up more macroprudential tools and it’ll be a stressful situation and all bets are off in that situation. The problem with Wall Street is they’ve got too much probability on that branch (financial stress gets worse) and not enough probability on the other branch (financial stress gets better), so I think they’re going to reprice to the slow growth scenario.”