In a Reuters interview, St. Louis Fed President James Bullard expressed his views on interest rates, inflation, and the possibility of a recession.

Contrary to some of his FOMC colleagues who foresee interest rates peaking at 5.00-5.25%, Bullard believes the policy rate may need to rise between 5.50% and 5.75% to effectively combat inflation.

Bullard emphasized that once rates reach a “sufficiently restrictive” level, the bias should be to maintain them “higher for longer” to ensure inflation is fully under control.

He also stressed the importance of being responsive to incoming data in the coming months, rather than committing to a fixed path for interest rates. “You wouldn’t want to be caught giving forward guidance that said we’re definitely not doing anything and then have inflation coming in too hot or too sticky,” he said.

As for the possibility of a recession, Bullard dismissed the idea, citing a strong labor market as a key indicator. He explained, “the labor market just seems very, very strong. And the conventional wisdom is that if you have a strong labor market, that feeds into strong consumption… and that’s a big chunk of the economy.”

He added, “it doesn’t seem like the moment to be predicting that you have a recession in the second half of 2023.”

Richmond Fed President Thomas Barkin said yesterday that unemployment rate could hit double digits. He pointed to the 30 million people working in hospitality, retail, retail and entertainment, which makes up around 20% of total workforce. Shutting down of these industries could lead jobless rate to mid-to-high teens. And, “We’re going to have a tough second and third quarter, that’s for sure.”

At the same time, businesses are already planning their post-pandemic lives, preparing for more resilience to health crisis. “Folks who are in consumer facing businesses are thinking very aggressively about how you can build separation, cleanliness, a health protocol,” into their operations, he added. “People are rethinking supply chains — to diversify them. They have seen the implications of an outage.”

St. Louis Fed President James Bullard said there is “no reason” the economy can’t come back in a “V-shape” rebound. He added that a robust recovery can happen if it’s “managed appropriately”. He pointed to the surge in jobless claims and noted most people believed unemployment rate is “already in the double-digit range”. Though, “ideally, the unemployment rate would spike at a high level then come down again as we get the economy started up again on the other side of this crisis.”

Chicago Fed President Charles Evans said there is a “hopeful possibility” that the sharp recession can be just a “temporary downturn.” But “there are many caveats in the hopeful story line, and many, many things must go right in order to minimize the economic pain.” The biggest risk is that coronavirus “may be with us for a while” and delay the recovery even into 2021.

San Francisco Fed President Mary Daly said “policy is in a good place. The economy is in a good place. And barring a material change in the outlook, then I’m comfortable with policy where it’s at, for the foreseeable future.” Her own forecast for inflation is that “it is gradually moving up to target, but my expectation is it wouldn’t achieve something like 2% until somewhere in 2021 as opposed to 2020.”

She added that “we haven’t seen much yet” regarding the impact of China’s coronavirus outbreak. And, “the most important impact would be through confidence, and we haven’t seen that yet either.”