Bullard Discusses Inflation and His Views on the Policy Rate with Yahoo Finance

St. Louis Fed President Jim Bullard shared his views on the latest inflation data and Fed action needed to put downward pressure on inflation. During an interview with Yahoo Finance, he also said that the probability of a U.S. recession is not particularly elevated at this time. Asked about the latest CPI report, Bullard said, “my takeaway is that inflation is broader and more persistent than many have thought and that the Fed will have to act in order to keep inflation under control.” He added that the Federal Open Market Committee (FOMC) has a plan in place—a 50-basis-point increase in the policy rate at the last meeting and also teeing that up for future meetings. Bullard noted that he has been advocating a policy rate of 3.5% by the end of the year. “I think we’re going to have to do more than just get to neutral. We’re going to have to go above neutral in order to put downward pressure on the persistent component of this inflation,” he said. Regarding the effect of the Fed’s forward guidance since late last year, Bullard noted that the two-year Treasury yield—which is indicative of where the market thinks policy will go—has moved up substantially over the last six to nine months. (For more details, see his May 6 remarks at Stanford University’s Hoover Institution, “Is the Fed ‘Behind the Curve’? Two Interpretations.”)