Bullard Speaks with Wharton about Inflation, Policy Rate, Fed Balance Sheet

February 25, 2022

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St. Louis Fed President Jim Bullard discussed inflation expectations, monetary policy accommodation removal and unemployment during an interview with Wharton Business Radio’s Behind the Markets program.

Bullard said he favored raising the target range for the federal funds rate by 100 basis points by July 1 and beginning Fed balance sheet runoff in the second quarter in reaction to elevated core PCE inflation, which in the latest reading was 5.2% measured from a year ago. He projected that core PCE inflation will be running at 3.5% by the end of this year.

Asked how the Federal Open Market Committee should manage the Fed’s bond holdings, Bullard said he would prefer to see passive balance sheet runoff where the Fed doesn’t replace maturing securities initially, but also to have a plan B whereby the Fed could consider asset sales at some point if inflation doesn’t moderate and doesn’t begin to return to the Fed’s 2% target.

Bullard said that he expects GDP to grow 3.5% to 4% in 2022. He also projected that unemployment will continue to fall, potentially dipping below 3% by the end of the year. In addition, he discussed the Treasury yield curve, growth of the money supply, cryptocurrencies and his expectation that direct impact on the U.S. economy from the war in Ukraine will be minimal.

This content originally aired on Wharton Business Radio, Channel 132 on SiriusXM.

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