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Jim Bullard: FOMC needs to lower rates further
CNBC Televisionยท2025-07-21 20:13

Monetary Policy & Economic Outlook - The US economy is showing signs of strength with improved sentiment and strong retail sales [1] - The Federal Reserve (Fed) is perceived to be in a comfortable position to observe economic developments before making policy changes, given the unemployment rate is near the natural rate and inflation is moderating [2] - The Fed is expected to re-engage with its recalibration campaign, potentially starting in September, to further lower rates [4] - The committee anticipates the neutral rate to be around 3%, suggesting further room for rate cuts [10] - A more realistic estimate for the neutral rate might be 325% to 350%, allowing the Fed some flexibility [11] - The Fed aims to bring inflation down to the lower end of the 2% range and ideally asymptote to 2% [11] Inflation & Fed's Response - The Fed's 2022 policy of sharply increasing the policy rate successfully reduced inflation without causing a recession [6] - The Fed's actions were followed globally, with some emerging markets even anticipating and moving ahead of the Fed [8] Fiscal Policy Impact - Some believe the Fed misplayed the 2021 episode, partly due to substantial expenditure authorized by Congress and the White House, which fueled inflation [6]