“If I ever got that honor (to be Fed chair), I would certainly take it”, Jim Bullard told reporters in New York three Fridays ago, the day before the Fed went into the blackout period ahead of the July FOMC meeting.
“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”, Bullard continued.
Jim was just sayin’ – on the “off chance” Donald Trump is looking to demote Jerome Powell and appoint a new chair that’s more inclined to cut rates at every possible opportunity.
Read more: Jim Bullard Says He Wants Jay Powell’s Job
Bullard of course dissented at the June meeting, the first dissent of Powell’s tenure and although he was steadfast in his contention that 25bps was “enough” for the July meeting, Jim is as reliably dovish as you can get. The White House doubtlessly knows that. Indeed, Trump’s decision to nominate Chris Waller was a pretty obvious hat tip to the St. Louis Fed.
Well, Jim was on the tape Tuesday and it’s likely he’s just as surprised as everyone else at how quickly trade tensions have escalated since last week’s meeting.
“US monetary policy cannot reasonably react to the day-to-day give-and-take of trade negotiations”, he said, in remarks from a prepared presentation in Washington.
That’s not what the White House wants to hear. Rather, Trump wants a Fed chair who will make it his or her business to not only “react to the day-to-day give-and-take of trade negotiations”, but to preempt those negotiations with aggressive easing, thereby strengthening America’s hand so that Bob Lighthizer goes into every face-to-face wielding the maximum possible monetary leverage.
Bullard goes on to note that he doesn’t expect trade tensions “to dissipate in the quarters and years ahead” and he also warned that intractable trade conflicts are “likely chilling global investment and feeding into slower global growth”.
They’re also “feeding into” market pricing for Fed cuts, something Trump has figured out and is now wielding to dramatic effect.
(Goldman, through Monday)
“While additional policy action may be desirable, the long and variable lags in the effects of monetary policy suggest that the effects of previous actions are only now beginning to impact macroeconomic outcomes”, Bullard continued, adding that policy changes in 2019 “were made in anticipation of continued uncertainty regarding global trading arrangements”.
While the nod to anticipatory dovishness and preemptive accommodation is desirable, Trump wants a Fed that hits first and asks questions later. Although the president continues to talk about “matching” on Twitter, his end game is to compel the Fed to adopt an overtly offensive strategy bent – cutting rates to give the US an edge.
“The bottom line is that US monetary policy is considerably more accommodative today than it was as of late last year”, Bullard concludes.
Maybe so, Jim. But not accommodative enough for the man in the Oval Office, who is not-so-quietly looking for a new Fed chair.
Where’s Judy?