James Bullard, Interview: with Bloomberg about Raising Rates and Balance Sheet Runoff

 “I think the Fed needs to move aggressively to keep inflation under control,” he said, noting that the Fed has a very large balance sheet and a very low policy rate today. “We need to get to neutral at least so that we’re not putting upward pressure on inflation during this period when we have much higher inflation than we’re used to in the U.S. economy. … History tells us that the faster we move to that situation, the better chance we’ll have of moving inflation back to target and getting a boom in the U.S. economy to boot.”

Bullard said his estimate for the neutral federal funds rate is 2%, although he would like to see the policy rate increase to 3% this year, which would be mildly restrictive and would help turn inflation around. He also said that he’d be happy to get started on the balance sheet runoff now.