On June 21, when Jim Bullard penned a short blog post explaining the rationale for the first dissent of Jerome Powell’s tenure as Fed chair, everyone made the same joke.
“This could double as a job application if Trump is looking for who might replace Jay once he’s demoted”, we quipped.
Within minutes of Bullard’s dissent, finance Twitterati was passing around the famous Trump lawnmower boy meme with the caption “GO FIND ME THIS JIM BULLARD GUY!”
— Michael P. Regan (@Reganonymous) June 19, 2019
Indeed, Trump’s decision to nominate Chris Waller to the Fed was a pretty obvious hat tip to Bullard.
On the last day before the pre-FOMC blackout, Bullard was on the tape quite a bit, repeating his contention that, for now, a 25bp rate cut is sufficient. That, against speculation that John Williams and Richard Clarida were laying the groundwork for 50bp with their already infamous Thursday remarks.
The confusion created by Williams and his Thursday evening “clarification” piqued Trump’s interest. The president took to Twitter on Friday morning to weigh in. “I like New York Fed President John Williams’s first statement much better than his second. His first statement is 100% correct in that the Fed ‘raised’ far too fast and too early”, Trump said.
Read more on the Williams communications faux pas: Fed Officials Succeed In Thoroughly Confusing Markets Just In Time For Pre-Meeting Blackout
Fast forward to Friday afternoon and Bullard said he wants to be Fed chair.
“If I ever got that honor, I would certainly take it”, he told reporters in New York. “I notice the phone hasn’t been ringing off the hook to get that. And obviously it’s something that the stars have to align for that to happen”.
Well, Jim, the US has a president who wants a dovish Fed chair and has instructed White House counsel to explore the legal ramifications of demoting the current occupant, so if it’s a fortuitous aligning of the stars you were waiting on, this might well be it.
Meanwhile, BofA was out explaining what they think happened on Thursday. “We suspect the FOMC was uncomfortable with the market moving toward a 50bp cut and wanted to push the market back to a 25bp baseline”, the bank wrote, in a Friday note, on the way to saying that Williams “unintentionally misguided the markets” and because the blackout period starts tomorrow, “the NY Fed had no other choice but to issue a press release [because] had they remained silent, the market would be convinced of a 50bp cut”.
After calling the whole thing “a debacle in communication”, BofA took a stab at explaining “what the Fed meant to say”. To wit from the bank:
- Take out an insurance policy: As Williams argued, the “best thing you can do for your children is to get them vaccinated. It’s better to deal with the short-term pain of a shot than to take the risk that they’ll contract a disease later on.” The Big Three” — Powell, Clarida and Williams — have all stated that it is prudent to take preventative measures with monetary policy when close to the zero lower bound (ZLB). They are worried about heightened uncertainties and risks about the outlook.
- The current US data are irrelevant: As Powell noted in his testimony to Congress, his policy decision was not swayed by the strong jobs report. We have also since received a strong reading on core CPI, exceptionally robust retail sales and a rebound in manufacturing surveys. Even in the face of such data, Clarida stated that the Fed is not setting policy based on the current baseline but on the outlook. Again, this goes back to the idea of risk-management, and it tells us to ignore the recent US data.
- The Committee will fall in-line…or else: Fed officials who had previously pushed back on a near-term cut — Dallas Fed’s Kaplan and Kansas City Fed’s George, for example — have most recently hinted that they would support a near-term move lower in rates. Chicago Fed President Evans was more explicit in a recent interview advocating for easier policy in order to generate above-target inflation.
Bullard, commenting further before the weekend, reiterated his position. “I’d like to go 25 basis points at the upcoming meeting”, he said. “I think easing cycle is a little bit strong for this situation”.
Maybe you’re not the guy for the job, Jim. After all, if it were up to Neel Kashkari, the Fed would have cut 50bp weeks ago.
If Bullard had deep insight, he would realize that he has limited value attached to his comments. The Fed needs a project to get a handle on what money is before they even dream about “monetary policy”.