Federal Reserve Chair candidate Bullard: Does not support a 50 basis point rate cut this week
Federal Reserve Chairman candidate James Bullard stated that he does not support the proposal to cut interest rates by 50 basis points this week and believes that the Federal Reserve's decision to lower rates is correct. He expects three consecutive rate cuts before the end of the year and considers a 75 basis point cut to be a significant move, but the Federal Reserve still has room for choice. Bullard also mentioned that the large purchases of mortgage-backed securities in the spring of 2020 may have been a mistake
According to the Zhitong Finance APP, James Bullard, a candidate for the next chairman of the Federal Reserve and former president of the St. Louis Fed, stated that he would not support a 50 basis point rate cut this week. In an interview on Friday, Bullard said, "I think the Fed's decision is correct." When asked if he would vote in favor of a 50 basis point cut, he replied, "No, I don't think so." He also mentioned, "It looks like the Fed will cut rates three times in a row before the end of the year."
This week, the Federal Reserve lowered borrowing costs by 25 basis points, which Fed Chairman Jerome Powell described as a "risk management" measure aimed at boosting the increasingly fragile labor market. This decision received almost unanimous support from all committee members, with the only dissenting opinion coming from Stephen Moore, an ally of Trump, who officially joined the Fed board this week and supported a 50 basis point cut.
Bullard stated that a total cut of 75 basis points by the end of the year would be a "significant move," but the Fed still has "options" as it enters next year. He estimated that the so-called neutral interest rate, which neither stimulates nor suppresses the economy, is about 3.25%.
He mentioned that for doves, a 25 basis point cut this week and another 25 basis points cut in October is "almost as good as a 50 basis point cut this week."
Earlier this month, Bullard stated that he discussed the possibility of becoming the Fed chairman with U.S. Treasury Secretary Scott Bessenet. Bessenet said this week that it was a "very good" meeting. Bullard said on Friday that he knows almost all the candidates, and they are all "excellent."
The former Fed official and current dean of Purdue University's business school also stated that the Fed's large-scale purchase of mortgage-backed securities in the spring of 2020 may have been a mistake. Ultimately, the U.S. housing market recovered after the initial shock of the COVID-19 pandemic, making such support unnecessary. He also added that it would take a long time to strip these securities from the Fed's balance sheet
