On A Wing & A Prayer

Fed officials are talking again. They can't seem to get their stories straight. A few are changing their own stories all too often. Consider today's remarks by St. Louis Federal Reserve President James Bullard. He said that monetary policy tightening since March appears to have had only limited effects on observed inflation and noted that “the policy rate is not yet in a zone that may be considered sufficiently restrictive.”

Using the so-called Taylor Rule for monetary policy, Bullard suggested the federal funds rate (FFR) may need to be in the 5%-7% range to bring inflation down. Not very long ago in an October 14 Reuters interview, Bullard said he favored "frontloading" hikes in the FFR. He suggested that the Fed should go ahead with the widely expected 75bps hike in the rate at the November 1-2 meeting of the FOMC and another 75bps hike at the December 13-14 meeting. That would bring the FFR target range up to 4.50%-4.75%. But then Bullard went on to imply that the Fed should pause for a while. Now he is talking about a 5%-7% FFR!