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Ex-St. Fed Chairman Louis says FOMC still has ‘some way to go’ on inflation

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James Bullard in Jackson Hole, Wyoming.

David A. Grogan | CNBC

Former St. Louis Fed President Jim Bullard said the Federal Reserve still had “a ways to go” in fighting inflation and there was still a risk that prices would recover.

Between March 2022 and July 2023, the FOMC adopted a series of 11 rate hikes to raise the federal funds rate from a target range of 0.0%-0.25% to 5.25%-5.5 %, and inflation has since fallen considerably.

Although markets now believe that interest rates have peaked and are starting to hold out hope for cuts next year, Bullard – who left his role as president of the St. Louis Fed in August – suggested that the central bank’s work was far from finished.

“So far, everything has gone well for the FOMC. Inflation has fallen, 12-month PCE core inflation has fallen from 5.5% to 3.7% – pretty good, but this is still only halfway to the 2% target, so you still have a way to go,” he told CNBC’s Joumanna Bercetche on the sidelines of the European Union conference. ‘UBS in London.

“I think you have to watch the data carefully and it’s very possible that inflation could turn around and go in the wrong direction.”

The October consumer price index, scheduled for release Tuesday, is expected to show an increase of 0.1% month-on-month and 3.3% year-over-year, according to a Dow Jones poll of economists.

“It’s just a one-month number, but I still think the risk for the FOMC is that the nice disinflation we’ve seen over the last 12 months doesn’t persist and it will then have to do more.” , Bullard said. .

On growth, Bullard said the risk of a U.S. recession next year is currently only about 15% and suggested the baseline should be that growth remains at trend while that inflation continues to fall, which would result in a “soft landing”.

“One thing about recessions is that there have only been four in the last 40 years, or about one every ten years, and they are very difficult to predict,” he said. he declares.

“None of these four were predicted in advance, so one way to think about it is that recessions are caused by shocks and shocks are inherently unpredictable, so the base case probably shouldn’t be a recession for 2024, although that’s a possibility.”

Correction: Between March 2022 and July 2023, the FOMC adopted a series of 11 rate hikes to raise the federal funds rate from a target range of 0.0%-0.25% to 5.25%-5 .5%. An earlier version incorrectly indicated the beach.

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