Bullard Discusses Policy Rate Needed to Lower Inflation with Bloomberg TV

October 19, 2022

St. Louis Fed President Jim Bullard discussed the policy rate needed to get inflation down during an Oct. 19 interview on Bloomberg TV. He gave the interview at the St. Louis Fed ahead of the annual Homer Jones Memorial Lecture.

In the September Summary of Economic Projections, the Federal Open Market Committee seemed to be coalescing around further rate increases at upcoming meetings, even by the end of the year, Bullard said. He noted that most of that has been priced into markets. He said he would anticipate that’s having an impact, which is good news for trying to get inflation down.

“But we’ll have to follow through on that in the subsequent meetings this year and get the policy rate up to a level where we can put meaningful downward pressure on inflation,” Bullard said. “I think that’s the main goal immediately ahead of us at the committee.”

Bullard said that since inflation has continued to surprise to the upside, the rate he had calculated in May as the minimal policy rate level needed to put downward pressure on inflation would be higher now, at 4.5% or 4.75%, closer to FOMC “dot plot” projections.

There’s a possibility of a good dynamic in 2023, Bullard said. “I think if inflation does start to decline meaningfully, we can stay where we are at this higher level of the policy rate that meets the committee’s criteria,” he said. “And at that point, we could watch inflation fall and get back to 2%.”

Bullard also spoke about the Fed’s balance sheet runoff, the labor market and other economic indicators, including GDP.

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