Bullard Speaks to MNI on the Inflation and Interest Rate Outlook

August 9, 2022

Speaking to Market News International, St. Louis Fed President Jim Bullard discussed his outlook on inflation, interest rates and the economy.

Bullard reiterated his belief that the Fed's policy rate will reach 3.75% to 4% by the end of the year, adding that this level is a bit higher than he would have thought even a couple of months ago because "inflation has continued to broaden out and doesn't look like it's turning the corner, at least based on the evidence we have today."

And if inflation continues to surprise to the upside, "we'll have to be higher for longer and the market will have to price that in," he said.

Bullard said he thought that compelling evidence of lowering inflation would be seeing year-over-year inflation measures coming down months in a row and possibly supported by anecdotal evidence that firms felt their pricing powers were being reduced, such as firms being worried about losing market share if they increase prices.

That would indicate a disinflationary dynamic that the U.S. experienced in the 1980s, Bullard pointed out. "And I think that's the process through which we can get back to 2% in a relatively short period of time, like 18 months," he said.

Bullard also discussed the strength of the labor market and the risk of recession in the U.S. and the rest of the world.