St. Louis Federal Reserve President James Bullard on Thursday said he didn’t see a U.S. recession on the horizon.
“We’ve got a good chance of a soft landing here going forward,” Bullard said, during a talk to the Little Rock Regional Chamber of Commerce.
Bullard said the economy is slowing but more to a 2% trend rate of growth after the strong 5.7% growth rate in 2021.
Bullard noted that gross domestic income – an alternate measure to the commonly-use GDP measure – was positive in the first quarter of this year, even though GDP was down 1.6% annual rate.
“Wall Street is talking a lot about recession – they’re talking about two quarters of negative GDP growth. I’m not really getting that from anecdotal information like this,” Bullard said.
Bullard said the labor market is very strong and it could cool down and still be better-than-average.
In a subsequent roundtable with reporters, Bullard said a 0.75% increase in the Fed’s benchmark interest rate at the FOMC July 26-27 meeting “would make a lot of sense.”
“I think this has been priced into the markets already,” Bullard said.
The St. Louis Fed president, who is a voting member of the FOMC this year, said he continues to support moving the benchmark rate up to 3.5% by the end of the year.
After being close to zero until March, the Fed has already hiked its benchmark Fed funds rate to a range of 1.5% to 1.75%.
The yield on the 10-year Treasury note
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has risen above 3% Thursday in the wake of hawkish minutes from the FOMC’s June meeting that were released Wednesday.
The minutes showed officials agreed they needed to raise rates to a so-called “restrictive” stance high enough to slow growth and that they might have to raise them still higher if inflation doesn’t cool.
Bullard said his preferred 3.5% Fed funds rate would be the “minimal” level for rates in this high inflation economy.