Following Federal Reserve Chair Jerome Powell’s annual speech at Jackson Hole on Friday, James Bullard, former president of the St. Louis Fed—nominated by the Trump administration to succeed Powell—told Bloomberg he believes a rate cut in September is very likely.
“Powell used the speech to reinforce expectations of a 25-basis-point rate cut in September,” Bullard said. “I was expecting that anyway, the markets were expecting that, and he based it on the latest jobs report, which was very weak. So I think it’s essentially a done deal.”
He added:“He didn’t go into detail about what comes after—October or December meetings. I’ve said 100 basis points by 2026. I think that can be adjusted over time, eventually reaching a full 100 basis points. But I would take it step by step, watching the data.”
On the Fed’s Policy Framework
Regarding the Federal Reserve’s framework review, Bullard said Powell did well in clarifying the central bank’s conclusions.
“I’m sure they had planned earlier this year to use the Jackson Hole speech to address framework changes,” he said. “I think the points were well thought out and well presented. They reflected much of what people had anticipated, so they did their best in terms of clarity.”
Managing “Two Economies”
Bullard was also asked whether the next Fed Chair would have to manage “two Americas”—a booming tech-driven economy and a sluggish traditional one.
“Yes, I think the distribution of income and wealth has become one of the most important topics for the Fed,” he said. “It’s not clear how far the Fed can go in tailoring interest-rate policy to different parts of the economy. When you change interest rates, it affects everyone, not just one group. That’s a difficult challenge, and I’ve researched it myself to understand it better. It’s been an ongoing debate and will remain an important macroeconomic issue going forward.”
Open to Leading the Fed
Earlier this week, Bullard was asked if he would accept the Fed Chair position if offered.
He told CNN:“I’ve been in touch with the Treasury Secretary and his office, and we’ll meet for an interview in the weeks ahead after Labor Day. At this point, it’s still in progress.”
He added:“I’ve said I would accept the role provided we’re set up for success—which I define as defending low, stable inflation in the U.S., safeguarding the dollar’s reserve currency status, and defending the Fed’s independence. Those three conditions must be met. But yes, I would accept.”
Inflation Target Stays at 2%
When asked whether the Fed’s 2% inflation target should be raised, Bullard was unequivocal:
“Absolutely not. I think it has become an international standard. If the U.S. were to abandon it, we’d invite chaos similar to the 1970s, when inflation was high worldwide and took years to control. We don’t want to go back to that. The 2% target is achievable and will be achieved, but inflation must come down steadily and gradually. That’s why there’s limited room to cut rates toward neutral, closer to balance, as inflation keeps declining.”
He added:“If the data doesn’t cooperate, the committee should adjust the plan. But for now, that’s the baseline scenario.”
On Trump’s Attacks and Fed Independence
Bullard also faced questions about Trump’s repeated attacks on the Fed and Powell, given his condition that the central bank’s independence must be respected.
“The Fed does what it does under the Federal Reserve Act,” he said. “All of this is governed by U.S. law. If the administration and Congress want to change the law, they can, and they have in the past. But they are very satisfied with this arrangement, and I think we all need to respect it.”
He added:“This means decisions are made by the FOMC. Members are appointed under rules, their terms roll over gradually—partly to keep politics out. If you let day-to-day politics interfere, the process would become messy. You’d end up with noisier policies, higher market interest rates, and investors demanding risk premiums. Everyone would face persistently higher borrowing costs. We don’t want that. We want smoother policy. That’s what the law provides.”
Bullard concluded: “Congress has looked at this many times over the years and has been satisfied. So I think we should all settle on the fact that this is how policy will be set.”
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