Former St. Louis Federal Reserve branch President James Bullard said he expects the Federal Reserve to begin lowering interest rates before inflation hits 2%, and that cuts could come as soon as March.
Bullard was speaking in an interview with the Wall Street Journal (gated).
Bullard predicts core inflation (which excludes food and energy prices) will slow to around 2% before October
- “Inflation on a 12-month core basis, you could get to 2% by the third quarter of this year,”
Says on the Federal Reserve … “They don’t want to get into the second half of 2024, and inflation’s already at 2% and you still haven’t moved the policy, right? That would be too late.”
- If inflation is somewhere between 2% and 2.5% “and you still haven’t moved the policy rate, then you might have to move very aggressively, with 50 basis points at a meeting or something, and that would be a difficult thing”
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The Fed was way behind the curve when inflation began rising, will they seek to be more timely when cutting?
ps. You should probably add an election year into the mix when thinking about the timing of rate cuts. Yeah, the Fed is independent, but it doesn’t hurt to have the White House owe you a favour or two.
