Bullard Speaks with CNBC about Inflation, Monetary Policy

June 18, 2021



St. Louis Fed President James Bullard discussed expectations for U.S. economic growth and inflation and his views on U.S. monetary policy during an appearance on CNBC.

Comparing the Federal Open Market Committee’s June 2021 Summary of Economic Projections with those of December 2020, Bullard said the FOMC has been surprised to the upside over the last six months. He noted that the median projections for 2021 in the latest SEP are for 7% real GDP growth, 3% core PCE inflation and 4.5% unemployment.

“We were expecting a good year, a good reopening, but this a bigger year than we were expecting, more inflation than we were expecting,” he said, “and I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.”

Regarding tapering the Fed’s bond purchases, Bullard noted that Fed Chair Jerome Powell officially opened the discussion at the June meeting and that the FOMC will have a chance to have more in-depth discussions. He mentioned several key factors for the FOMC to discuss, including pace; mortgage-backed securities vs. Treasuries; when to start; and how “state contingent” the taper would be. Given the volatility in the data and how outsized the numbers have been, he suggested that the FOMC will have to take a more state contingent approach (that is, react to incoming data) than in the 2013-14 taper.

Bullard also said he projected an increase in the target range for the federal funds rate in late 2022, which is related to his projections of 3% core PCE inflation this year and 2.5% in 2022. He said this would meet the Fed’s new framework of allowing inflation to run above the 2% target for some time before coming down to 2% over the subsequent horizon.

During the interview, Bullard also discussed cryptocurrencies and central bank digital currency.

Read the transcript (pdf).

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