Bullard Talks about Policy Rate and “Soft Landing” Prospects with Wall Street Journal

St. Louis Fed President Jim Bullard discussed his expectations for the policy rate and inflation and the prospects for a “soft landing” for the U.S. economy in a live interview with The Wall Street Journal. Bullard said that his policy rate projection included in the FOMC’s December Summary of Economic Projections, or SEP, was for a target range of 5.25% to 5.5% at the end of 2023, which is slightly higher than the median projection. He cautioned that it’s not certain where the economy or inflation will be then. “The underlying judgment on my part is that inflation will probably recede during 2023 but not as fast as it’s projected to by financial markets,” Bullard said, adding that there will probably still be some inflation at the end of the year. The policy rate now is almost but not quite into a zone that could be called restrictive, Bullard said. He later said that there’s “something to be said” for moving the rate as quickly as possible to the right level—over 5%, according to the SEP—to continue to push down inflation. “We want to guarantee to the extent we can that inflation will come down and get back on a steady path toward the 2% target,” he said. Bullard said strong labor markets and stronger-than-expected GDP growth in the second half of 2022 have pushed off recession forecasts way into the second half of 2023, and it’s not clear that a recession will materialize. “I think the prospects for a soft landing have improved markedly,” he said.