The last time we heard from Jim Bullard, the future Fed chair (we jest – maybe) was delivering a presentation in Washington, where he remarked that “US monetary policy cannot reasonably react to the day-to-day give-and-take of trade negotiations”.
That was on August 6, less than a week after the July FOMC meeting and just a day after the S&P careened to its worst session of 2019 following China’s decision to hit back at Donald Trump’s August 1 trade escalation by letting the yuan slide through a 7 handle.
“[I don’t expect] trade tensions to dissipate in the quarters and years ahead”, Bullard said during the same presentation.
Jim is of course a notorious policy dove and his dissent at the June meeting (in favor of a rate cut) was the first of Jerome Powell’s tenure as chair. Subsequently, he dialed back the dovishness a bit, repeatedly insisting that he preferred a 25bps cut in July as opposed to the 50bp move many market participants (and one disgruntled US president) were hoping for.
On Thursday, after days upon days of wild market swings tied to conflicting trade headlines and jitters about an inverted 2s10s curve, Bullard showed up on Fox Business.
Hilariously, Jim was asked if the Fed needs to hold an “emergency session” ahead of the September FOMC meeting. “Uh, I don’t think so. I think we can react appropriately”, Bullard said, haltingly.
(If the video does not load, please refresh your page – full clip here)
“The timing is never critical on these things. A couple of weeks one way or another probably doesn’t matter”, Jim mused.
Famous last words or just a rational pushback against a network that was pretty clearly trying to extract a market-soothing soundbite from the Fed’s most reliably dovish voter? Time will tell, but it’s worth noting that Fox was asking about an inter-meeting, emergency rate cut on a day when the market got a series of upbeat data points (not to mention a great report from Walmart) which together support the assertion that the economy didn’t even need one rate cut, let alone two or three and an “emergency” cut between meetings.
Pressed (hard) by Fox on the prospects for a 50bp cut in September, Bullard wisely demurred. “I wouldn’t want to prejudge that”, he said.
Asked about the inversion of the 2s10s, Bullard essentially took a Trump approach – that is, “We’ll see what happens”.
“Any inversion that’s going to send a bear signal for the economy is going to have to be sustained over time”, he added.