'Maverick' Bullard: "Fed's Base Outlook is Three Rate Cuts This Year"

James Bullard, former President of the Federal Reserve Bank of St. Louis and a prominent hawkish figure (favoring monetary tightening), expressed agreement with the Federal Reserve's (Fed) dot plot predicting three interest rate cuts this year.

James Bullard

In an interview with Bloomberg TV on the 9th, Bullard said, "At this point, we have to take the Federal Open Market Committee (FOMC) and Chairman Jerome Powell at face value." He emphasized, "Their best guess is still three rate cuts this year. This is the base case."

Attending the HSBC Global Investment Summit held in Hong Kong, he stated, "We are seeing very successful monetary policy alongside a fairly strong economy," and assessed, "A lot is going right for the Fed." He also added that based on the indicators confirmed so far, the Fed is now in a position to cut rates. Bloomberg News reported, "As inflation moves toward the Fed's target amid a resilient economy, Bullard expects three cuts this year."

These remarks contrast with recent cautious tones from Fed officials, which have dampened expectations for early rate cuts. Earlier, the Fed maintained the possibility of three cuts this year in the March dot plot, but recently some officials have suggested only two cuts, one cut, or even that cuts may be difficult. The interest rate futures market has also leaned toward expectations of two cuts this year. Considering strong economic indicators and concerns about inflation rebounding, the view that the Fed has no reason to rush rate cuts is gaining traction.

Notably, Bullard, who moved last year to become Dean of the Krannert School of Management at Purdue University, was known as a hawkish figure advocating aggressive rate hikes during his time at the Fed, making his recent comments particularly noteworthy. Bloomberg News pointed out that Bullard has supported more proactive policy measures to prevent accelerating inflation.

Accordingly, the key will be upcoming economic indicators such as the U.S. Consumer Price Index (CPI). According to FactSet, Wall Street expects the March CPI released on the 10th to have risen 3.4% year-over-year and 0.3% month-over-month. Core CPI is estimated to have increased 3.7% year-over-year and 0.3% month-over-month. Attention will also focus on how officials’ projections for the interest rate path this year are reflected in the March FOMC minutes released the same day.

This week, remarks are also scheduled from Austan Goolsbee, President of the Federal Reserve Bank of Chicago; Raphael Bostic, President of the Atlanta Fed; John Williams, President of the New York Fed; and Mary Daly, President of the San Francisco Fed. Earlier, Daly described the Fed’s dot plot predicting three cuts this year as a "reasonable baseline," even while saying rate cuts are not urgent.