Bullard Speaks with Bloomberg about Raising Rates, Balance Sheet Runoff

March 22, 2022

St. Louis Fed President Jim Bullard talked about the removal of monetary policy accommodation and his expectations for the U.S. economy during an interview on Bloomberg Surveillance. The interview was live from the St. Louis Fed’s Economy Museum.

“I think the Fed needs to move aggressively to keep inflation under control,” he said, noting that the Fed has a very large balance sheet and a very low policy rate today. “We need to get to neutral at least so that we’re not putting upward pressure on inflation during this period when we have much higher inflation than we’re used to in the U.S. economy. … History tells us that the faster we move to that situation, the better chance we'll have of moving inflation back to target and getting a boom in the U.S. economy to boot.”

Bullard said his estimate for the neutral federal funds rate is 2%, although he would like to see the policy rate increase to 3% this year, which would be mildly restrictive and would help turn inflation around. He also said that he’d be happy to get started on the balance sheet runoff now.

Bullard added that the U.S. economy is doing very well and is expected to grow at an above-trend pace into 2024, despite the geopolitical risks posed by the Russia-Ukraine war. Consequently, that above-trend growth should continue putting downward pressure on the unemployment rate and strengthen labor markets further, he said.

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