Where Does Jim Bullard Go for His Apology on Inflation?
The St. Louis Fed president was seen as the hawkish outlier among policy makers. It turns out he was the realist.
Right all along.
Photographer: Luke MacGregor/Bloomberg
Jim Bullard, the president of the St. Louis Federal Reserve Bank, has been warning for months that the central bank risked losing credibility if it didn’t hurry to tighten monetary policy. He was the lone member in the Fed’s last plot of policy projections to pencil in a fed funds rate above 3% by the end of the year, and investors largely brushed him off as the “the biggest hawk” on the committee. He was right, and now the Bullard case is becoming the market’s base case.
Bullard was vindicated, of course, after inflation surged to a new four-decade high in May and survey data showed consumers’ long-term inflation expectations are drifting higher, a telltale sign that elevated inflation is at risk of becoming entrenched. Now, the Fed will have to get to Bullard’s levels anyway but without the benefit of a fast start. He was correct to lobby colleagues to start raising rates by 0.50 percentage point in March and right again when he said that the Federal Open Market Committee needed to keep 0.75 percentage point increases on the table.