James Bullard, Interview: Economic Club of Minnesota

Fed Funds

Regarding the 25bps Hike in May: “I did support it. I thought it was a good next step for the committee … basically the preponderance of the committee wanted to be above 5%. So, this move puts us above 5% … I think it’s appropriate to put the policy rate at a higher level so we can try to get the inflation problem behind us sooner and get back to the 2%.”

“I am willing to be data dependent and not prejudge … It is impressive that we moved above the 5% benchmark.”

Recession

“We live with recession probabilities every day and things happen, shocks happen. And yes, the economy could go into recession, but that’s not the base case. I think the base case is slow growth, probably somewhat softer labor market and declining inflation. So, that would be the soft landing scenario. And I think all of you should put most of your weight on that scenario.”

“The rumors of the imminent demise of the economy are greatly exaggerated, I guess is what I would say.”

Jobs

“Maybe just comment on today’s jobs report, which was stronger than expected again. So this is 12 reports in a row that Wall Street has been surprised to the upside. Guys, maybe you should change your model a little bit? That’s 12 in a row. That’s never happened as far as the chart I saw today anyway. So, I think unemployment lower today than it was a year ago, and the lowest since 1969 … So, this is a very tight labor market. It’s going to take a while to cool it off.”

GDP

“I would say strong labor markets, that conventional wisdom is strong labor markets mean consumption is going to hold up pretty well. That’s 70% of the economy says it’s going to do pretty well. So that gives me confidence about my prediction about continued slow growth for the US economy.”

Inflation

I” think we can bring inflation down without having… And just allowing the labor market to come back to normal, not go beyond coming back to normal. So that’s why I’ve got the more of a soft landing scenario in my head maybe than others. Sometimes you hear pundits say, “Well, until unemployment goes to very high levels or whatever, you won’t get inflation to come down.” I don’t think that’s the right analysis.”