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Bullard Says Dot Plot Will Do the Job for the Fed

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Bloomberg 09:26 · 8588 Views

Former St. Louis Federal Reserve President James Bullard previews the FOMC December interest rate decision and what the Federal Reserve can expect from a second Trump administration.

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Transcript

  • 00:00 Can you speculate on next year you've lifted you're on the FOMC for the first Trump term.
  • 00:05 How different is this second term, Jim?
  • 00:09 Well, I think it's a big advantage that we have seen this movie before.
  • 00:12 And so
  • 00:13 the first time around it was it was more uncertain.
  • 00:15 I think this time
  • 00:18 you kind of know
  • 00:20 the MO for
  • 00:22 President-elect Trump, how he operates,
  • 00:24 the kinds of things that
  • 00:26 he'll consider most important.
  • 00:27 And I think for markets,
  • 00:29 you know, it's basically a probusiness administration and that carries a lot of weight.
  • 00:34 Meanwhile, Jim, we're talking about the potential for signaling into next year.
  • 00:39 How far do you think that this Fed chair is willing to go at a time where the market really has pretty low expectations for how many rate cuts are next year?
  • 00:47 Can he or does he want to get ahead of them and signal potentially even more restrictive stance?
  • 00:54 Yeah, I think the dot plot is going to do the job
  • 00:56 for the Fed here.
  • 00:58 And the dot plot is,
  • 00:59 you know,
  • 01:00 Wall Street either thinks 3 or maybe 2 is a median number of rate cuts for next year.
  • 01:06 Those will be spread out over the years.
  • 01:08 So that's going to dovetail with the story.
  • 01:11 That
  • 01:11 much slower
  • 01:13 pace of
  • 01:14 rate reduction.
  • 01:16 They've come on with this meeting.
  • 01:18 They will have come 100 basis points in just three meetings.
  • 01:22 It's going to be nothing like that next year.
  • 01:25 And I think it'll set up a clear
  • 01:28 case
  • 01:28 for pause,
  • 01:30 high probability of pause in July,
  • 01:32 in January,
  • 01:34 that'll give them the March meeting and that they can sort of look around at the March meeting and see if they want to go further or not.
  • 01:40 And that will depend mostly on the inflation data at that point.