St. Louis Federal Reserve President James Bullard spoke with Bloomberg Radio’s Kathleen Hays today on Bloomberg Radio & Television. While Bullard said he “didn’t want to prejudge” whether the committee could act in April, the St. Louis Fed official said last month’s employment report showed “continuing improvement” in the labor market.
James Bullard said the Fed reserves the right to change policy at any time: “Not only have we moved at all kinds of different meetings, we’ve actually had inter-meeting meetings, special meetings, and moved at those meetings. So you can do a lot of things. You know, I’m not saying we’re I’m planning on that or anything, but the Committee certainly reserves the right to make a move at any time… We debate at all meetings. I think all meetings are live meetings. There’s no other way to think about it.”
On what is most important to him right now, he said: “I have been concerned about inflation expectations…Now, they have recovered probably back to December levels. And I find that comforting. But you’d actually like to see those numbers even somewhat higher than they are today. And because they reflect somehow the credibility of the Fed and its ability to hit a long run inflation target of 2 percent.”
Bullard said a growth slowdown in the first quarter could weigh on the central bank’s plan to raise interest rates gradually: “Growth has been somewhat tepid, first quarter growth. Tracking forecasts are now being marked down…It’s fair that there hasn’t been all that much data since the March meeting and it has not — you know, it’s been mixed in various ways, so, you could draw your own conclusion from that.”
James Bullard Reads Into the Fed’s Tea Leaves:
James Bullard on the U.S. Economy, Dollar, Inflation:
KATHLEEN HAYS: I’d like to welcome our Bloomberg television audience to our Bloomberg Radio interview with Jim Bullard, president of the Federal Reserve Bank of St. Louis. Thanks for having us back.
James Bullard: Thanks for coming today, to the Homer Jones Lecture.
HAYS: I know. We’ll talk about that later, because I’m really curious if Homer Jones might be rolling over in his grave over some of the things going on at the Fed these days.
But Jim, breaking news from the Fed, maybe not a big surprise here. There was a heated debate at the meeting in the middle of March about whether to move on rates or not. Some people, I think, are a little bit surprised that the push to maybe make the rate hike was still as heated as it was.
What does it tell us about the potential debate at the April meeting, at the end of this month?
James Bullard: Did the minutes say it was heated?
HAYS: Well, we are looking at a back and forth.
James Bullard: I see.
HAYS: I mean some people wanted to meet. So you guys just showed up and left. But you didn’t all agree.
James Bullard: Well, of course, people are passionate about their positions and they should be. These are hard decisions to make and they bring their views to the table. And, you know, I don’t think we actually get that much out of the minutes compared to what you just read in interviews and speeches that people give.
You pretty much know everybody’s view and so the, you know, the same types of arguments are made at the meeting. And it goes both ways. People cite different data and so on and have different interpretations of current events, so…
HAYS: Well, there’s a lot of concern about the impact of the global market turmoil on the economy. There was debate over inflation, were temporary factors boosting core inflation or not?
But you’re right, since the March minutes, there were some important data points. You, for example, said, just a couple of weeks ago, that a strong April jobs report could make the case for a move in April.
Now, we got the April jobs report. Good payrolls. The Participation Rate rose. But we saw that the average weekly hours did not rebound. There is a concern about the aggregate hours work and the signal they’re sending about the strength of the economy.
What is your view on that report?
Is it strong enough to make the case when you go to the — when you go to Washington in April in a couple of weeks?
James Bullard: I thought it was a good report, but it’s consistent with a long string of pretty good reports. Labor markets, I think, there’s continuing improvement, even blips one way or another, I think, are maybe relatively minor. I think it’s you’re basically seeing, you know, steady improvement in the U.S. labor markets.
I think the issue is probably growth more than — more than labor markets. And growth has been somewhat tepid, first quarter growth. Tracking forecasts are now being marked down. How much of that is residual seasonality, I think that will be a good topic for the April meeting.
HAYS: As a matter of fact Atlanta said GDP tracking estimates now down to like 0.5.
James Bullard: Yes.
HAYS: It had been well over 2 percent just about a month ago.
James Bullard: But you’ve got this first quarter puzzle where the first quarter always seems to be weaker and a — and if you do a seasonality analysis, you’ll get, you know, extra seasonality in the first quarter.
So what the heck is going on?
I think that’s a good question.
HAYS: Is it fair to say though, that with the doubt over the strength of GDP in the first quarter and what kind of footing is this?
Because you — if you get to — if you’re on 2 to 2.5 percent growth, you do not want to see first quarter GDP under 1 percent.
James Bullard: It’s very tough, yes.
So does this mean that all things considered, this meeting is not one where there’s going to be an — a debate over the April increase as much as a debate over the June increase?
James Bullard: Well, I don’t want to prejudge the meeting. We’ll — we’ll see how people feel when they come into the meeting and how they suss the data. I mean it’s — it’s fair that there hasn’t been all that much data since the March meeting and it has not — you know, it’s been mixed in various ways, so, uh, you know, you could draw your own conclusion from that.
But — but I kind of don’t want to be in the business of trying to predict what the Committee may or may not do at the meeting.
HAYS: But what are — but what are — what is — what is your sense, Jim?
Because it seems to me you are someone who was — who would have been ready to make the case for April?
But I — I really am curious if — if this is something that you’d say something has shifted and now this — this — this appropriate go slowly strategy that Janet Yellen described so well a couple of weeks ago,