James Bullard at Jackson Hole, Wyoming.
David A. Grogan | CNBC
Former St. Louis Fed President Jim Bullard says the Federal Reserve still has “a ways to go” in fighting inflation and that there is still a risk that prices will rise a- again.
Between March 2022 and July 2023, the FOMC implemented a run of 11 rate hikes to bring the funds rate from a target range of 0.0%-0.25% to 5.25%-5.5%, and inflation has fallen significantly since then.
Although markets now believe that interest rates have peaked and have begun to look ahead to cuts next year, Bullard – who resigned as head of St. Louis Fed in August – that the central bank’s work is far from over.
“It’s been so good for the FOMC for so long. There’s still a ways to go,” he told CNBC’s Joumanna Bercetche on the sidelines of the UBS European Conference in London.
“I think you have to watch the data very carefully and it is very possible that inflation will turn around and go in the wrong direction. “
The October consumer price index to be released on Tuesday is expected to show an increase of 0.1% month on month and 3.3% on an annual basis, according to a poll of Dow Jones economists.
“That’s just a one-month number, but still I think the risk to the FOMC is that the nice disinflation we’ve seen over the past 12 months will not continue and the then they have to do more,” Bullard said. .
On growth, Bullard said the risk of a US recession next year is currently only around 15%, and suggested that the bottom line should be that growth will remain at a moderate pace as long as inflation continues to decline, producing a “soft landing.” “
“One thing about recessions is that there have only been four in the last 40 years – that’s about one every 10 years – and they are very difficult to predict,” he said.
“None of those four were expected in advance, so one way to think about that is that recessions are caused by shocks and the shocks are really unpredictable, so maybe that the baseline will not be a decline for 2024, even if it is possible. “
Correction: Between March 2022 and July 2023, the FOMC implemented a run of 11 rate hikes to bring the funds rate from a target range of 0.0%-0.25% to 5.25%-5.5%. An earlier version made a mistake in the field.
