James Bullard, Fed boss of St.
(Boursier.com) — James Bullard, the head of the St. Louis Fed, said on Friday that financial stability issues could be resolved with additional measures to ease banking tensions, while monetary policy can continue as soon as possible. it’s up to her to tackle high inflation. “The pursuit of appropriate macroprudential policy can contain financial stress, while appropriate monetary policy can continue to exert downward pressure on inflation,” summarized Bullard, who also notes that expectations of inflation remain contained. Thus, the official judges that the tools of the Fed can allow him to lead these two fights simultaneously, that aiming to support the banks, and his mission of stabilizing prices.
Faced with the solidity of the economy (!), Bullard also indicates that it has revised its 2023 target for the terminal rate upwards to between 5.5 and 5.75%. He sees low inflation expectations as a good sign for disinflation this year.
Bullard seems to put the banking crisis into perspective, which he thinks should ease, and notes that the most likely scenario would then be further monetary tightening, as ‘financial stress’ diminishes and if the economy remains strong. He adds that it is up to the Fed Chairman to determine the tactical timing of the next rate hike.
According to him, it would be “a disaster” to abandon the 2% inflation target, which would bring the world back to the situation of the 1970s. financial stress, but adds that in such a case, the Fed would react. Either way, Bullard thinks the likelihood of a global crisis resulting from the recent banking stress remains low.
“The US banking system remains very strong and resilient,” said Bullard, who sees an 80% chance that the current financial stress will ease.
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