When Will Bullard Flip Next?

Image: St. Louis Fed

Image: St. Louis Fed

If this weekend busted your NCAA bracket, why not start up a new betting pool? Bet on how long it will be before St. Louis Fed President James Bullard changes his mind again. Bullard, if you’ll recall, issued the famous “Bullard Put” in October 2014, stating that the Fed should consider delaying ending its policy of quantitative easing. However, a few short months later he had taken a hawkish bent, advocating for an interest rate increase. A couple months after that, while still advocating for rate increases, he said that the Fed should cut rates if the initial rate liftoff were to shock markets. In August 2015, Bullard stated that turmoil in markets shouldn’t delay the first rate hike, and continued to support a rate hike in October even though he acknowledged that market turmoil might make it difficult to hike rates. Bullard continued his hawkish bent through 2015.

In January 2016 he was still in favor of four more Fed rate hikes this year. Yet just a month later he cited falling inflation expectations as a reason to oppose further rate hikes, stating that the Federal Reserve’s credibility was threatened. A month later, this past Friday, Bullard stated that the Fed’s inflation and employment goals have largely been met and that it is time for the Fed to start edging interest rates higher. At this rate, Bullard should come out around late April stating his opposition once again to further rate hikes. Since the FOMC meets April 26-27 and there will be a week-long blackout period ahead of that, let’s mark April 29th as the day he flips again. You think we’ll get that call right?

On a more sobering note, Bullard is the type of person whose opinions the business, media, and political establishments listen to, tout as an example of a respected thinker, and expect everyone else in the country to take seriously. It would have been one thing had Bullard’s flip-flopping occurred solely while he was not a voting Federal Open Market Committee (FOMC) member, but this year he has a vote. He is one of the ten people (two Federal Reserve Board seats remain vacant) voting on the direction of US monetary policy this year. He is one of the ten people expected to run the economy, cure what ails it, ensure financial stability, etc. Yet he changes his opinions on the core issue the FOMC deals with seemingly on a whim, with no real rhyme or reason. He might as well flip a coin.

Bullard’s vacillating is a perfect example of why such a huge amount of power should never be given to a handful of supposed experts. At the end of the day, decisions on monetary policy are ultimately a judgement call, made with the same level of thought that might be given to where to hold the office Christmas party. The value of the dollar, the standard of living of the American people, and the health and well-being of money and banking in the United States are placed in the hands of a tiny group of people. It is a recipe for failure and disaster. Far better to leave everything to the workings of the market, where the choices of millions work together for mutual betterment and to outweigh the efforts of would-be tyrants, than to trust in the capricious and flighty fancies of our modern-day mandarins.

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