Nicklaus: Bullard's focus on data, not dogma, served the economy well
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Nicklaus: Bullard's focus on data, not dogma, served the economy well

Jun 21, 2023

James Bullard, the president and CEO of the Federal Reserve Bank of St. Louis speaks before a meeting of Greater St. Louis, Inc. on Wednesday, March 2, 2022 at the St. Louis Art Museum. Photo by Robert Cohen, [email protected]

In a monetary policy world where doves argue for lower interest rates and hawks for higher ones, Jim Bullard was difficult to categorize.

In 15 years as a member of the Federal Reserve’s key policy committee, Bullard relied on data, not dogma. His ability to adapt his thinking to new circumstances made him one of the committee’s most influential members.

Bullard, who resigned last month as president of the St. Louis Federal Reserve Bank to lead Purdue University’s business school, sometimes moved markets with his comments about the economy. More important, he moved his fellow policymakers.

The nation was descending into financial crisis when Bullard joined the Federal Open Market Committee in 2008. As the recovery from that crisis dragged on, Bullard was an early advocate of additional bond-buying stimulus, known as quantitative easing, to ward off deflation.

Chairman Ben Bernanke and other colleagues came round to Bullard’s way of thinking, and the economic expansion became the longest in U.S. history.

Bullard once described himself as “the North Pole of inflation hawks,” but in 2019 he cast two dissenting votes in favor of lower interest rates. At the time, he argued that inflation was stubbornly below the Fed’s 2% target and that the economy was in danger of slipping into recession.

Two years later, as the economy recovered from the COVID-19 pandemic, Bullard published an article warning that higher inflation might be on the horizon. Since then, he’s argued for aggressive rate increases to bring down inflation. In a March 2022 dissenting vote, he said the Fed would “risk losing credibility” if it didn’t act more forcefully.

In this Nov. 19, 2019, photo James Bullard, president of the St. Louis Federal Reserve Bank, gestures during an interview in Richmond, Va.

“The biggest thing I would say about him was that he was flexible,” said Scott Colbert, chief economist at Commerce Trust Co. “He was very dovish post-crisis and then swung toward hawkish more recently. In both cases he was very assertive about it and was ahead of the pack.”

“He often went against the grain, but seemed quite prescient at times,” said David Andolfatto, a former St. Louis Fed economist who now chairs the University of Miami’s economics department.

“For a regional Fed president he was pretty influential.”

Bullard’s influence was enhanced by frequent speeches to business and academic groups, at which he patiently answered questions from the audience and the press. “He was very transparent and coherent in his policy views,” said Ken Matheny, a St. Louis economist who follows Fed policymaking. “There was seldom much doubt about what he was thinking about things.”

Bullard built up the St. Louis Fed’s research department, which ranked third among the 12 regional Fed banks in a recent count of economists’ academic citations. And he was a collaborative leader, Andolfatto said: “A great thing about Jim was he was not dogmatic. He was very open to policy advice, and if it made sense, he would adopt it.”

Bullard’s successor will be chosen by non-banker members of the St. Louis Fed’s board of directors, subject to approval by the Board of Governors in Washington. Andolfatto said he believes the board is looking for a candidate similar to Bullard: A PhD economist who is a solid theoretician but also a good communicator and collaborator.

In this Nov. 19, 2019, photo James Bullard, president of the St. Louis Federal Reserve Bank, gestures during an interview in Richmond, Va.

Steve Helber, AP Photo

That person will have big shoes to fill. If the years ahead are as economically turbulent as the 15 just past, the Fed and the nation will certainly need a Bullard-like figure in a policy role.

David Nicklaus is a retired Post-Dispatch columnist who continues to follow the St. Louis business scene. Reach him at [email protected]

Last week's jobs report points to a solid U.S. economy with little sign of a recession on the horizon and one that can withstand higher interest rates, St. Louis Federal Reserve president James Bullard said Monday. Financial markets are flashing signs that an economic downturn could arrive sometime next year, as Americans grapple with the highest inflation in four decades and the Federal Reserve pushes borrowing costs higher. But Bullard said in an interview with The Associated Press that the central bank wouldn't have to drive the economy into a recession or significantly raise unemployment to bring inflation down to its 2% target. "Now we have lots of inflation, but the question is, can we get (inflation) back to 2% without disrupting the economy? I think we can," he said. Bullard's optimism coincides with a rapid pace of interest rate increases by the Fed, intended to combat the highest U.S. inflation in 40 years. Higher rates limit the ability of consumers and businesses to borrow and spend, which can cool growth and inflation, but also carry the risk of tipping the economy into a downturn.

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