In a Reuters interview, St. Louis Fed President James Bullard expressed his views on interest rates, inflation, and the possibility of a recession.
Contrary to some of his FOMC colleagues who foresee interest rates peaking at 5.00-5.25%, Bullard believes the policy rate may need to rise between 5.50% and 5.75% to effectively combat inflation.
Bullard emphasized that once rates reach a “sufficiently restrictive” level, the bias should be to maintain them “higher for longer” to ensure inflation is fully under control.
He also stressed the importance of being responsive to incoming data in the coming months, rather than committing to a fixed path for interest rates. “You wouldn’t want to be caught giving forward guidance that said we’re definitely not doing anything and then have inflation coming in too hot or too sticky,” he said.
As for the possibility of a recession, Bullard dismissed the idea, citing a strong labor market as a key indicator. He explained, “the labor market just seems very, very strong. And the conventional wisdom is that if you have a strong labor market, that feeds into strong consumption… and that’s a big chunk of the economy.”
He added, “it doesn’t seem like the moment to be predicting that you have a recession in the second half of 2023.”
