president Bullard wonderful to speak to
you again Jim I'll cut right to the
chase you change the economic dialogue a
number of years ago with the request
that we find regime change are we at
that moment right now where there's
literally a regime change in our
economics where the Fed has to shift the
way it does business well I think for
Europe the ECB is facing a difficult
situation so you might look at that as
as a crossroads to so to speak of
monetary policy for the US I think we're
generally speaking in good shape I have
emphasized that we face some downside
risk from the trade war and I've tried
to encourage the committee to take
action which we have to try to mitigate
those risks and keep us on an even keel
in the u.s. what is the urgency of the
next number of meetings we see some
houses saying one and done and I don't
want you to game the Fed I know that's
not part of the dialogue but are we too
focused on the one next meeting October
30 versus the what-ifs of December 11
and into 2020 I think we'll go on a
meeting by meeting basis here the
committee has taken two moves and if you
look at my remarks this morning I think
we've moved a lot in the last year if we
were sitting here a year ago we would
have been talking about the Fed raising
rates in 2019 not lowering rates and
instead we during January February we
said we were taking the interest rate
hikes off the table and then getting
into June July August September we
started talking about reducing rate so
the shift in monetary policy in the US
has been quite dramatic over the last
year I'd say a hundred and twenty five
hundred thirty five basis points not
just the 50 basis points that we've had
so one part of what we need to do is
take stock of where we are but I think
also we have to consider additional
insurance in the meetings ahead so
should the Fed be more aggressive given
the
the economy well I mean if you if you
buy the argument that I just made we
have been pretty aggressive and normally
you would think with long and variable
lags in policy that it would take a
while for those things to have an impact
on actual hard data in the US I would
expect those kinds of effects to come
online during the second half of 2019
the first half of 2020 and you are
seeing some of that in housing markets
for instance where say refinancing
activity and other things have picked up
but you descent it didn't favor a half a
point cut instead of the quarter point
cotton did you still think next time
around that we need 1/2 1/2 a point cut
generally speaking I'd like to do more
but I don't want to prejudge the meeting
it's let's let's get to the meeting and
make a decision there Jim Bullard our
Michael McKee enjoys being in the press
conference in the long and variable lag
is when he asks a question a chairman
Powell and he really doesn't get a
chairman like answer so we're gonna try
you right now what is the efficacy of
rogue where you have some coffee there
the coffee's better in London by the way
in st. Louis or in New York over here
Tom yeah over here well that's been
considered as well we can't fly vet bill
over there we welcome all on Bloomberg
radio and Bloomberg Television to this
conversation with Jim Bullard Jim
seriously Michael McKee is asked and
asked and asked the simple question what
is the efficacy of rate cuts with an
economy that's doing pretty well or
pretty darn good or as vice chairman
Clara de says solid what is the the good
that we can get out of these rate cuts
well these always have impacts on the
margin that's the way monetary policy
works and I would say to those that say
the US economy is doing pretty well I
would agree in the sense that
consumption looks pretty strong and
labor markets look very good in the US
but those are lagging indicators you'd
be looking backward if that's all you
looked at that you have to look forward
and think about the risks that might lie
ahead and I think financial markets are
a great place to look
what might happen going forward and
that's why I've tried to bring some
financial signals to greater prominence
in monetary policy discussions like
wrist slope of the yield curve Jimbo let
me get some in the academic side of this
we talked to Michael Spence in the last
hour the laureate from Stanford in New
York University can monetary policy us
wage a trade war can you guys fix the
pain and the agony of a trade war well I
got this a question a little earlier
today also but obviously we can't do
anything directly about trade but we do
have our mandate to maintain high
employment and low inflation and we're
trying to do the best we can to take on
board what's going on with the trade war
and other risks to the global economy
into the US economy and conduct a
monetary policy that will help us meet
our objectives as best we can and and
frankly we've been meeting you know we
certainly have a great labor market but
the inflation side has been somewhat
weak we've been below target inflation
expectations remain below target I'd
like to recenter inflation and inflation
expectations back at our 2% target I
think that would be a great outcome
what's your read on global growth and
trade negotiations are things getting
better or are they getting worse what
we're seeing is day to day tit-for-tat
which is a normal part of any
negotiating situation that's what the
game theory tells you is going to happen
we can't as policymakers be reacting day
to day because that would just create
even more uncertainty around trade and
around monetary policy so I think what
we can do is take on board the idea that
the 50 year or 75 year consensus about
the u.s. pushing toward more and more
trade liberalisation has broken down and
that we have more trade uncertainty and
businesses are going to have to take
that uncertainty on board and they're
going to have to devise business
strategies that cope with the high
degree of uncertainty that exists in
this arena I'm
James Bullard I know you don't want to
talk too much about the next meeting but
according to the minutes of the last
meeting the FOMC is of course discussing
when it should end it's insurance rate
cuts could it mean that we should be
looking for a change in language to
indicate after this meeting that the bar
is actually higher for extra cuts well
I'd leave that to the chair that's what
he gets paid the big bucks to do we'll
see where the committee comes down on
that I think we obviously do use
language changes and have in the past
but whether anything would be brewing
and that I don't know again on Bloomberg
radio and Bloomberg Television and
conversation with Jim Bullard many on
radio you know what the dots look like
let's bring it up right now
dots go I sort of an ugly chart McKee
loves this he's got it in this kitchen
oh well Jim Bullard Dakota Hudson
doesn't have a dot on here he'll be
starting for st. Louis tonight where's
the Bullard dot and there are we done
with the dots are we gonna move on from
the dot we've talked before I'm not
really a fan of this dot plot but we're
stuck with it I guess I think we're
trying to give the best indication we
can of what we think might happen over
the forecast horizon I don't think the
dot plot probably reflects the true
degree of uncertainty that exists there
I've put you know my ideal scenario is
that we do this insurance now but that
the economy actually grows pretty well
and labor markets continue to be strong
in 2020 and maybe 2021 and then we're
able to actually take these rate cuts
back at some point in the future that's
what happened during the 1990s and so if
I'm just putting out my base scenario
then that's what I'd say I hope that's
what happens but on the other hand I
want to lower now because I think we
want to take out insurance against these
risks and the idea that the trade war
might morph into something more serious
for the US economy
Jim Bullard in every conversation I have
from the youngest market economists out
to the new managing director of the IMF
people are talking about confidence
about the will to move forward into 2002
what is the state of business confidence
in the st. Louis district certainly for
agriculture and manufacturing especially
and some other businesses as well they
express a lot of angst about trade
issues and I get a lot of stories
detailed stories about how it affects
particular markets I think that's a
major concern overall business
conditions however especially for
domestic facing businesses remain good
and they're cautiously optimistic going
forward but they are concerned about
about that policy the trade policy issue
this is a very tom kean question tom
you've been anchoring together for way
too long there's a debate on whether
current Fed policy is slightly
contractionary slightly stimulative or
neutral which one is it I'd say we're at
neutral and might be able to get to
slightly accommodative soon but that's
because I have a lower so called our
star than other people have so I would
say the neutral policy rate is somewhat
lower for me than than what it would be
for other people how behind the curve is
the Fed yeah I don't know if we're
behind the curve I think we did take a
lot of action over the last year as I
was describing earlier and so I think I
think we've taken on board the idea that
these risks have been brewing and I
think that's important whether we've got
it exactly right of course you never
know but I'm hopeful that we're right on
track here