May 20, 2022
St. Louis Federal Reserve President James Bullard

St. Louis Federal Reserve President James Bullard has said that third-quarter economic growth will provide the shot in the arm the U.S. economy desperately needs, helping it to maintain a healthy level of inflation.

Economists predict that gross domestic product growth will hit record highs in the third quarter as businesses reopen following the easing of Covid restrictions. Bullard expects that growth will be “off the charts,” and this rebound will drive inflation to a less worrying level.

“This is the biggest growth quarter of all time in the US. It looks like 30% at an annual rate,” said Bullard, speaking at a virtual conference with the Boeing Center for Supply Chain Innovation.

“I actually think you may see more inflation than we have during the pre-pandemic era when things were very quiet and inflation was very subdued” he added.

The Fed recently updated its policy framework in order to gain greater control of price growth over time, and has pledged not to raise rates until inflation exceeds 2%, even if unemployment levels fall considerably. Some economists have raised doubts over the achievability of such a policy, but Bullard believes it is the right move.

“I think this will be quite successful,” he continued. “I actually think we’re at a moment where you may see some inflation now in in the future from several sources.”

Bullard also went against a number of his Fed colleagues by predicting the unemployment rate will fall as low as 6.5% by the end of the year, a figure well below the median projection of 7.6%. Unemployment fell to 8.4% in August, having reached a peak of 14.7% at the height of the pandemic.