We asked a Federal Reserve board member 12 questions — here is what he said by Jonathan Marino on Sep 27, 2015, 8:39 AM Advertisement
 The Federal Reserve decided last week not to hike rates — but James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, isn't buying the argument. He has railed against the Federal Reserve's strategy, saying the central bank is playing bad baseball. He's the Federal Reserve's last remaining true hawk, or someone intent on raising rates. He will sit on the 2016 Federal Open Market Committee, where he'll have a say in monetary policy. FOMC seats rotate between each of the regional Federal Reserve banks, and this year he's an alternate on the committee. Bullard visited Business Insider's New York headquarters and sounded off on topics as varied as cybersecurity, global factors challenging the Fed, and House Republicans stepping up pressure on the central bank. We've edited Bullard's responses for clarity below. The Fed should lift rates now  Business Insider: Why is now the time to raise rates? Bullard: "It's not complicated. If you look at the goals of monetary policy, they're maximum employment and inflation. We've basically achieved everything that we can achieve with monetary policy.
"The policy rate is near zero, where it's been for close to seven years now. That's not the normal rate. The committee thinks the normal rate is 350 basis points, so we've got a long, long way to go to get the policy rate up to something normal.
"I think that the case is compelling, and I'm concerned that the debate has drifted toward even small moves being construed as tightening monetary policy. That isn't the case."
It is all about inflation  Business Insider: Which is more important for liftoff in rates: wage growth, unemployment, or inflation? Bullard: "Of those three, by far the most important by far is inflation. Inflation is running low right now. A lot of that is because of oil prices. But low oil prices are ultimately a bullish factor for the US economy. For that reason you might want to try to look through the low prices of oil today and instead be looking to a measure like the Dallas Fed trimmed measure mean inflation rate, which is running at 1.6%.
Certainly, you want everyone to get paid as much as possible, but wages are going to be a trailing factor. Another thing about wages, especially looking at nominal wages, there's a productivity factor in there because … your wage could go up because productivity was higher, or because of inflation. Both of those factors have been low, and wage growth has been low in response to that.
"On growth, growth forecasts for 2015 were upgraded at the last meeting from where they were previously. We previously had a picture of the first half of 2015 that was fairly weak, but now we have a picture of the first half of 2015 that was actually at trend or even a bit above trend, for growth.
"I expect continued growth, above trend growth, in 2016 and 2017. That's why I'm being a little more aggressive in saying we're at an inflection point for the US economy.
"Labor markets are now going to start to get very tight. Inflation's going to return to target, and our policies are a long ways out of position compared to where we should be."
Unemployment could drop to 4%  Business Insider: What will happen when rates increase? Bullard: "I think as we increase interest rates, I would expect continued labor market improvement. The unemployment rate will head down into the 4% range, possibly into the very low 4% range over the forecast horizon. That's already baked in the cake because the committee has already committed to a low path of interest for this stage of the business cycle. I think there will be continued improvement on those dimensions. "On the dollar, if the US is the strongest economy in the world, you're going to see a stronger dollar. That's unpredictable, because other economies can surprise to the upside. Sometimes that will strengthen their currency and weaken the dollar. It's unclear what the ramifications would be for the dollar."
See the rest of the story at Business Insider
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