Prices as Bullard begins his interview:
S&P index -83.5 points or -2.14% at 3817.01
NASDAQ index -329 points or -2.88% at 11060
2 year yield, 2.562%
10 year yield, 2.783%
I agree that 50 basis points is a good plan for now
market repricing is partly due to Fed, partly due to prices before the downturn
Wants to get the rate to 3.5% by the end of the year
The faster you get rates higher and get inflation expectations under control, the more room we have to lower rates
Can see lowering rates in 2023 or 2024 if we get inflation under control
I don’t see stagflation as a scenario. Don’t see 1970s style market with recession and higher inflation.
It seems we have a very good economy
The economy should slow down but it should still be above trend during 2022.
I don’t see anything stopping unemployment going below 3% this yearWe will need higher interest rates to keep inflation under controlSee growth faster in the 2nd half of the year.
Sees US growth of 2.5% or 3% this year above potential rate of 1.75% to 2.0%.
We have a 2nd reopening going on with people getting used to getting out of the pandemic. People are getting out and about and that will lead to strong consumption this yearDon’t see a recession this year
Don’t see a recession next year, not my base caseRecessions come because of some really bid shock. There can be some, but I don’t see a really big shock. We want to see all the measures of inflation moving in the same direction. Unfortunately that is to the upside now.
Inflation is very tough on low and medium income households and on renters
Some businesses are going to get punched in the face as consumers substitute basic necessities for luxuriesI think this disinflationary pressures will come through the product cycle as companies become afraid of raising prices. Corporations think of better ways to increase productivity and lower costs
Quantitative tightening is an important part of our policyWe have that teed up to start June 1
It is not just the US that is pursuing this policy. It is all central banks around the worldAll things equal, QT should put pressure to the upside on rates. Him him
Summary: Bullard stayed away from the idea of raising more than 50 basis points, Although he stuck to the 3.5% end of year Fed funds target. He also sees growth remaining strong at 2.5% – 3% this year with unemployment perhaps moving below 3% by the end of the year. As a result, he does not see a recession and even said that he does not see a recession next year as his best case. Him him
Values at the end of the interview show:
S&P index -90.38 points or -2.32% at 3810.40
NASDAQ index -352.25 points or -3.09% at 11036.25
2 year yield 2.558%
10 year yield 2.71%