James B. Bullard

For other people named James Bullard, see James Bullard.

James Bullard, president of the Federal Reserve Bank of St. Louis

James B. Bullard is the chief executive officer and 12th president of the Federal Reserve Bank of St. Louis, positions he has held since 2008. He is currently serving a term that began on March 1, 2011.

Life and career

As the St. Louis Fed president, Dr. Bullard participates on the Federal Open Market Committee (FOMC), the Federal Reserve’s chief monetary policymaking body, and was a voting member in 2010. He directs the activities of the Federal Reserve's Eighth District head office in St. Louis and branches in Little Rock, Ar.; Louisville, Ky.; and Memphis, Tenn. Prior to becoming president, Dr. Bullard was vice president and deputy director of research for monetary analysis at the Federal Reserve Bank of St. Louis.

An economist and monetary policy scholar, Dr. Bullard joined the Bank in 1990 as an economist in the Research Division. His research has appeared in numerous professional journals, including the American Economic Review; Journal of Monetary Economics; Journal of Money, Credit, and Banking; Journal of Economic Growth; and Journal of Economic Theory. Dr. Bullard is also a co-editor of the Journal of Economic Dynamics and Control and a peer reviewer for more than two dozen periodicals and institutions. He has participated in more than 150 conferences, symposia and lectures sponsored by foreign central banks, academic institutions and monetary policy groups around the world.

Bullard is an honorary professor of economics at Washington University in St. Louis, where he also sits on the advisory councils of the economics department and of the Olin Business School's Center for Finance and Accounting Research. He is a member of the University of Missouri-St. Louis Chancellor's Council and serves on the boards of the St. Louis Regional Chamber and Growth Association and of the United Way of Greater St. Louis.

He is a native of Forest Lake, Minnesota. He received a bachelor's degree in quantitative methods and information systems, and economics from St. Cloud State University in 1984 and a Ph.D. in economics from Indiana University in 1990.

Dr. Bullard succeeded William Poole as president of the St. Louis Federal Reserve Bank on April 1, 2008. According to Fed salary figures released for 2010, Bullard earns $281,300 per year, at the low end of the range for the 12 regional bank chairs but still considerably more than Fed chair Ben Bernanke ($199,700), whose pay is limited by law.

Noted public positions taken since 2009

Deflationary outcome

Main article: Lost Decade (Japan)

In the face of a pessimistic outlook by some for the U.S. stock market before Thanksgiving week, on Sunday, November 22, 2009, Dr. Bullard said "that the central bank should extend its mortgage-backed securities buying program beyond its expiration date in March [2010]. That decision [the reporter added] would keep interest rates low and help keep the dollar weak." Bullard's statement was cited as a reason for, through mid-afternoon on November 23, a positive day in the stock markets, albeit while gold price also continued to rise, and the dollar continued to fall on the foreign exchange market.

During the summer of 2010, Bullard warned that the U.S. economy was at risk of becoming "enmeshed in a Japanese-style deflationary outcome within the next several years," a view he presented in his research paper, "Seven Faces of 'The Peril'". According to the New York Times report, Bullard "had been viewed as a centrist and associated with the camp that sees inflation, the Fed’s traditional enemy, as a greater threat than deflation," along with Charles I. Plosser, Philadelphia Fed, Richard W. Fisher, Dallas Fed, and Thomas M. Hoenig, then-president of the Kansas City Fed. Laurence H. Meyer, a former Fed governor, said Bullard’s new position was "very significant .... He has been one of the most hawkish members." More concerned with the risk of deflation (i.e less hawkish) have been Eric S. Rosengren of the Boston Fed, Janet L. Yellen then-president of the San Francisco Fed and now vice chair of the Federal Reserve Board of Governors, and William C. Dudley of the New York Fed.

In his “Seven Faces” paper, Bullard argued it may not be prudent to rely on a near-zero policy rate alone to keep the U.S. out of the deflationary outcome; he recommended that current interest rate policy be supplemented with additional quantitative easing, an unconventional monetary policy tool.

Quantitative easing

Main articles: Quantitative Easing and Monetary Policy

The Federal Reserve engaged in two large-scale asset purchase programs between 2009 and 2011, commonly referred to as the first and second rounds of quantitative easing, or QE1 and QE2. Both programs had detractors, including those who likened the policy to “printing money”. In a Nov. 15, 2010, "open letter" to Fed Chairman Bernanke published in the Wall Street Journal, several economists, investors and political strategists argued that quantitative easing program "should be reconsidered and discontinued ... The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment." Other economists said that QE2 either had no effect on the economy or was counterproductive. However, after QE2 ended in June 2011, Bullard said that QE2 worked and it “demonstrated that the Fed can conduct an effective monetary stabilization policy even when policy rates (the federal funds rate) are near zero." Responding to Bullard’s assertion, David Nicklaus of the St. Louis Post-Dispatch wrote, “The problem for the Fed, of course, is that neither QE1 nor QE2 has yet brought about a vigorous economic recovery … Bullard and other Fed policymakers may be convinced that they have a powerful new tool at their disposal, but they still need to persuade the public that it works.”

Bullard argued that while the effects of QE2 on the financial markets occurred during the run-up to the FOMC’s decision to pursue the program, policymakers expected the effects on the real economy (e.g., consumption and employment) to occur between six and 18 months after the policy action—which happens with conventional monetary policy as well; but then analysts may have difficulty determining exactly which movements in real variables are due to monetary policy and which ones are due to other influences on the economy that occur in the meantime, he said. “Disentangling these effects is a standard problem in monetary policy analysis,” he said, adding that “the real effects of the asset-purchase program will most likely be conventional, just as the financial market effects were.”,

While Bullard has supported the Fed’s use of quantitative easing, he argues that it is rarely optimal for the Fed to use the “shock and awe” approach to this policy, wherein the Fed announces a large purchase with a predetermined purchase size and fixed duration like QE2. Rather, he has stated he favors a “state-contingent” policy path similar to how the FOMC adjusts the federal funds rate on a meeting-by-meeting basis: “Any policy path should be reviewed carefully and seriously at each meeting for possible adjustment given the incoming data.”,

In the wake of QE2, Bullard maintained that even with the policy rate near-zero, the Fed still has tools to combat economic weakness. He calls the central bank’s balance sheet policy “the most natural and effective tool for this purpose.” However, Bullard, along with Dallas Fed President Richard Fisher, disagreed with affixing a calendar date to policy. According to a Reuters report, "Bullard and Fisher do not represent the consensus view championed by Fed Chairman Ben Bernanke, who has strongly hinted at the possibility of further action. But they do remind investors that the central bank will not be united if it decides to delve even further into the realm of unconventional monetary policy." In February 2012, Bullard told Reuters that a third round of quantitative easing would only be necessary if the U.S. economy deteriorates and inflation drops, adding that the U.S. economy was not in such a situation.

Inflation concerns

Main article: Inflation

Bullard has argued that the Fed should focus on headline inflation and de-emphasize core inflation, which has been a long-standing issue for the FOMC. In a May 2011 speech to the Money Marketeers Club in New York City, Bullard said that, “Many of the old arguments in favor of a focus on core inflation have become rotten over the years. It is time to drop the emphasis on core inflation as a meaningful way to interpret the inflation process in the U.S.” And in a May 2011 column in the Southeast Missourian, Bullard wrote that, “The emphasis on core inflation may give the impression that the FOMC does not take into account some important price changes when making decisions about monetary policy. This is damaging Fed credibility in Main Street America.”,

Furthermore, Bullard stated in May 2011 that the FOMC should adopt an explicit headline inflation target, which “would allow discussion of other measures of inflation in the context of a clearly stated ultimate goal with respect to the price side of the dual mandate.” Writing on the investment web site Seeking Alpha, economist Dr. Duro Ahnto assessed Bullard’s stance on focusing on headline inflation. While disagreeing with some of Bullard's points, he wrote, “Given the limitations and blind spots of core inflation, Bullard makes a convincing case for directly targeting headline inflation with monetary policy. Otherwise, the Federal Reserve remains at risk for maintaining monetary policies that are too loose for too long.”

Also, the St. Louis Fed president has stated that inflation targeting is the modern successor to the commodity standard and is the better choice in the current environment. While a commodity standard forces some accountability on the central bank, in the past “it did not always work because governments sometimes changed the rate between the commodity and the currency,” Bullard said. Inflation targeting also forces more accountability to the central bank and anchors longer-term inflation expectations. He said that with inflation targeting, the central bank would have to specify its goal with respect to inflation and would be held accountable for achieving that goal. On Jan. 25, 2012, the FOMC set an inflation target of 2%, as measured by the annual change in the price index for personal consumption expenditures.

Federal Reserve Independence

Main article: Federal Reserve System

Since the beginning of the financial crisis in 2008, criticism of the Federal Reserve has become more prominent. Among those demanding to end the Fed is long-time critic U.S. Rep Ron Paul (R-Texas), who has stated that the U.S. Constitution does not give Congress the authority to delegate monetary policy. The creation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 revealed divided opinions on the future of the Federal Reserve. Some argued that the Republican victories in the 2010-midterm elections made ending the Fed more likely, while others, such as former-Sen. Christopher Dodd (D-CT) and Sen. Richard Shelby (R-IN), contended that the reforms introduced in the Dodd-Frank Act would strengthen the Fed by narrowing its focus to traditional responsibilities.,, ,

Bullard took a public stand in May 2010 in support of Federal Reserve independence and against any move in Congress that would lead to the politicization of the Fed. He has also argued that “The Fed should remain involved with community bank regulation so that it has a view of the entire financial landscape." As a Fed supporter, Bullard has said that the Federal Reserve is “well-designed” as a central bank because it keeps monetary policy decisions away from partisan politics while remaining part of the democratic process. Countries lacking an independent central bank may have poorer economic outcomes (e.g., higher inflation), he states. Bullard has said that the Fed is audited by several entities, including the GAO, and thus is directly accountable to Congress. Some have called for an end to the Fed’s dual mandate of promoting maximum sustainable employment and price stability, a dual purpose questioned by critics including former Fed Chairman Paul Volcker. Bullard has suggested that the best way to achieve both parts of the mandate is by pursuing low and stable inflation.,

Financial media accolades and appearances

In February 2011, Bullard was named in a Bloomberg.com article as “a bellwether person,” an “indicator of where the full committee (of the FOMC) is heading.” Macroeconomic Advisers named Bullard the FOMC’s second biggest mover of markets in 2010, behind Fed Chairman Ben Bernanke. In January 2012, Macroeconomic Advisers named Bullard the biggest mover of markets in 2011, because he “had a larger market impact than any other FOMC member. His speeches and interviews moved the two-year Treasury yield by almost 17 basis points last year.” In 2010 and 2011, Bullard appeared numerous times on CNBC, including co-hosting “Squawk Box” and “Closing Bell”, as well as on CNN, Bloomberg Television and Fox Business.

External links

• "James B. Bullard - bio". Federal Reserve Bank. Retrieved 2008-06-06.
• "James B. Bullard - bios". Federal Reserve Bank of St Louis. Retrieved 2008-06-06.