Economist's Insights

Bullard Buys Balance Sheet Roll-Off, Balks at Current Rate Path Projection

Jun 22, 2017

In a Thursday interview with the Wall Street Journal, St. Louis Fed President Bullard, who doesn’t vote in 2017 or 2018, said he supports beginning the process of trimming the Fed’s balance sheet but sees no reason for the Fed’s projected rate path to be so steep. On the balance sheet, Bullard would like the Fed to begin the cash flow roll-off “sooner rather than later,” adding “We’ve outlined an approach that is going to be very much a go-slow approach, and so I think we could start the ball rolling. It’s going to roll very slowly anyway.” Addressing the recent inflation weakness, he said, “I’m open to the idea that maybe there was just some noise in there—that’s possible, …But it looks more broad-based to me, and now with other corroborating factors like the 10-year [Treasury yield] coming down to low levels, oil prices falling, it just doesn’t look like there’s a lot of price pressure.” This is why he says the 3-hikes-a-year pace the Fed continues to project is “unnecessarily aggressive.”