March 22, 2022
St. Louis Fed President Jim Bullard spoke about the removal of monetary policy easing and his expectations for the U.S. economy during an interview on Bloomberg Surveillance. The interview was live from the St. Louis Fed Museum of Economics.
“I think the Fed needs to act 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 at least achieve neutrality so that we don’t put upward pressure on inflation during this time when we have much higher inflation than we’re used to in the US economy. … History tells us that the faster we move into this situation, the more likely we are to get inflation back on target and get the US economy booming to boot.
Bullard said his estimate of the neutral federal funds rate is 2%, although he would like to see the key rate rise to 3% this year, which would be slightly restrictive and help buck inflation. He also said he would be happy to start the balance sheet runoff now.
Bullard added that the U.S. economy is doing very well and is expected to grow above trend through 2024, despite the geopolitical risks posed by the Russian-Ukrainian war. Therefore, this above-trend growth should continue to put downward pressure on the unemployment rate and further strengthen labor markets, he said.
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