(Kitco News) – Following Fed chair Jerome Powell’s annual speech at Jackson Hole on Friday, Former St. Louis Fed President James Bullard – who has been shortlisted by the Trump administration to replace Powell – told Bloomberg he believes a September rate cut is squarely on the table.
“[Powell] used the speech to solidify expectations for 25 basis points in September,” Bullard said. “I was expecting that anyway. Markets were expecting that. He leaned into the most recent labor market report, which was very soft, and so I think that's a done deal.”
“He didn't say too much about beyond that, what you want to do with the October meeting or the December meeting,” he added. “I have said a hundred basis points going into 2026. I think you could adjust as you go forward and eventually get a full 100 basis points. But I would go slowly in order to watch the data.”
On the Federal Reserve’s policy framework review, Bullard said Powell did a good job of outlining the central bank’s findings.
“I'm sure much earlier in the year they had targeted that they would have the framework discussion, and that they would use the Jackson Hole speech to talk about changes to the framework,” he said. “I thought those were thoughtful, and they're well presented in this speech, and they're about what many have speculated on, so I think they did about as much as they can on the framework side.”
Bullard was then asked if the next chairman of the Fed would be put in the position of managing two distinct American economies, an exceptional technology-driven economy, and a stagnant conventional economy.
“Yeah, I think income and wealth distribution have become more salient topics for the Fed,” he replied. “It's not that clear how much the Fed can really do providing interest rate policy for the whole economy. If you change the rate structure, that affects everyone, not just one particular group that you might be targeting.”
“I think that's been something we've had to wrestle with, and I've actually done research on it myself to try to understand it better from my point of view,” Bullard added. “I think this has been a theme for a while, and that'll be an important theme in macroeconomics going forward.”
Earlier in the week, Bullard was asked if he would accept the position of Fed chair if it were offered.
“I have been in contact with the Treasury Secretary and the Treasury Secretary's office, and we'll get together for an interview in the coming weeks after Labor Day,” Bullard told CNN. “But at this point, that is still under construction.”
“I've said that I would accept the job as long as we were set up for success, which I would define as defending low and stable inflation in the United States, defending the reserve currency status of the dollar, and defending the independence of the Federal Reserve. Those three conditions would have to be met,” he emphasized. “But yes, I would.”
Asked about the possibility of raising the Fed’s 2% inflation target, Bullard was unequivocal.
“I would definitely not change the inflation target,” he said. “I think that's become an international standard. I think if the United States went off that international standard, you would set up a period of chaos, like the 1970s, where you had high inflation really around the world. It took years and years to get that under control, so you really don't want to go back to anything like that. The 2% target that I think can be hit and will be hit, but you want inflation to asymptote slowly and nicely into the 2% target. And that's why you have a little bit of room to bring down rates toward the neutral rate, closer to neutral, as inflation continues to come down toward target.”
“If the data doesn't cooperate, then the committee has to adjust that plan,” he added. “But that's the basic plan at this point.”
Bullard was also pressed on President Trump’s frequent attacks against the Fed and its current chair, considering his precondition that the central bank’s independence be respected.
“The Fed does what it does and acts like it does because of the Federal Reserve Act,” he replied. “This is all occurring under U.S. law. If the administration and the Congress wants to change the law, they certainly can do that, and they have done it a few times in the past, but they're very happy with the arrangement, and so I think that we all need to respect that arrangement and make monetary policy according to the act.”
“That means that the decisions are made by the Federal Open Market Committee,” he continued. “The members are appointed according to the rules. They roll over on a slow basis, partly to stay at arm's length from day-to-day politics. If you let day-to-day politics come in, that's a very noisy process. You then you get noisier policy, noisier rates in markets, and investors have to protect themselves against that. You get a risk premium; everyone's paying higher rates all the time. You don't want that, you want a smoother process. I think the law provides that.”
“Congress has looked at it many times over the years, and they're pretty happy with it,” Bullard concluded. “So I think we all have to settle down and say that's how we're going to make policy.”
