While Wall Street and many economists have forecast a recession this year, James Bullard, president of the Federal Reserve Bank of St. Louis, isn't betting on one.
"The rumors of the imminent demise of the economy are greatly exaggerated," he said Friday at the Economic Club of Minnesota, where Minneapolis Fed President Neel Kashkari questioned him about interest rates, the economy and the recent banking turmoil.
Bullard pointed to Friday's stronger-than-expected U.S. jobs report as proof. The unemployment rate, which dropped to 3.4%, is the lowest since 1969. Bullard also noted it was the 12th-consecutive jobs report to exceed Wall Street's expectations.
"Guys, maybe you should change your model a little bit," he jabbed.
Instead of a recession, Bullard said, the more likely scenario — or his "base case" — is for slow economic growth along with a somewhat softer labor market and declining inflation. That would qualify as a so-called soft landing, what Fed policymakers have angled for as they've aggressively raised interest rates in the past year or so — putting the economy at greater risk of recession — in order to tame high inflation.
Bullard, a Minnesota native, serves on the Fed's rate-setting committee, but unlike fellow member Kashkari, he does not have a vote on the panel this year.
Bullard said he supported this week's approval by the Fed of the 25 basis-point increase, which pushed interest rates above 5%. He told reporters afterward that he will wait to decide whether to recommend a pause or another increase at the June meeting based on the latest economic data.
Bullard said he doesn't believe that unemployment must rise in order for inflation to fall. Instead, he said he thinks the Fed can bring down inflation while the tight labor market cools off and returns to normal.
