VIEW: RBC: Don’t Outrightly Discount Bullard

In the wake of St. Louis Fed President Bullard’s (’22 voter) Thursday comments, RBC note that “the reality is he has been pretty spot on over the last year or so. In that regard, you cannot simply discount his musings as the rantings of an extreme hawk. In his framing of raising rates 100bps by the beginning of July, we think he added a very important caveat. He seemed to suggest that once they get to July, they pause/take a breather/reassess…in other words, what they do in the second half would be entirely a function of how the data are looking. From our perspective that makes his seemingly extreme view of hiking somewhat palatable. If they can sell this approach as just trying to play catch-up (following a terribly misguided approach to policy last year) and then they pause for a while, it’s not the worst idea. By the time we get to July the whole favourable-year-ago-comp idea will have eaten into the Y/Y inflation rate and we should be in a better place on the inflation front thus pressure will have come off the Fed to keep an aggressive approach in place. It’s not our preferred way of raising rates by 100bps, but it’s an idea that should not be outright discounted.”