August 18, 2021
St. Louis Fed President James Bullard shared his outlook for U.S. economic growth and inflation during a MarketWatch interview and Barron’s Live event. He also discussed monetary policy, including his view that the Federal Open Market Committee should get going on tapering the Fed’s asset purchases.
Bullard noted that the U.S. economy is very strong. He said that he expects real GDP growth to be between 6% and 7% for 2021 and to be 4% for 2022.
Regarding inflation, he noted that core PCE inflation is 3.5% (measured from a year ago), and he expects it to remain above 2.5% in 2022. “So, you’ve got an inflationary shock here that is large, and that the committee has to take into account when trying to calibrate policy in 2022,” he said.
The risk is having even higher inflation than expected in 2022, Bullard noted. “I think it behooves us as policymakers, and also markets, that we get the taper finished in the first quarter of 2022,” which would give the FOMC more flexibility for responding to inflation in the remainder of that year if needed, he said.
During the interview, he also discussed the tight U.S. labor market, his forecast for “liftoff” (i.e., raising the policy rate from near zero), the Fed’s goal of averaging 2% inflation over time, an incipient housing bubble and the move toward nonuniform currencies with cryptocurrencies.