MNI INTERVIEW: Fed To Cut Every Meeting To End Year - Bullard

The Federal Reserve is on track to lower interest rates by a full percentage point over the next six months, starting with three 25 basis point cuts at each of this year's remaining meetings, as tariff continue to have only muted effects on inflation and a fairly static labor market persists, former St. Louis Fed President James Bullard and a contender to become the next Fed chair, told MNI. 

"This meeting will be about what kind of path the committee wants to lay out in the dot plot. Would they want to upgrade from June, when they had two reductions for the second half of 2025? Now I think they’ll probably go to three, so that puts the October meeting on the table as a presumptive meeting to have another cut," he said in an interview. (See: MNI: Bullard Interviewed By Bessent For Fed Chair Job )

Next year, "you could have another cut in the first quarter" after the FOMC has made certain any acceleration in inflation is temporary, he added. "They have room to cut and still be putting downward pressure on inflation while reacting to weaker jobs numbers." 

Traders have priced in a steeper easing path as the labor market data weakened over the past month, with the two-year and 10-year yields falling to roughly 3.5% and 4.0%, respectively. (See: MNI INTERVIEW: Fed To Cut Faster After Weaker Jobs - English)

50BP CUT UNLIKELY  

There's "not a strong enough case" for a jumbo size rate cut at next week's meeting, and doing so would unnecessarily set up expectations for more 50 bp cuts, Bullard said. "Does this mean you want to get much lower much faster? The committee doesn't seem to want to do that."

The labor market is in a low-hiring-low-firing balance consistent with a rapid shift in trade policy and uncertainty on the part of businesses, Bullard said. The AI boom is also likely drawing firms' resources away from hiring, he said.  

At the same time, inflation has come in reassuringly tame and is set to head lower in the first half of 2026, he said. The cost of tariffs is spread among foreign companies, suppliers and consumers and not passed through directly onto retail buyers. "The more extreme stories about the tariff effects on inflation don't seem to be materializing." 

Businesses will likely become comfortable with the new equilibrium of tariffs, deregulation and other growth provisions in the fiscal bill next year, driving growth higher over the medium term, Bullard said. 

REGIONAL FEDS

The circumstances under which a U.S. president can fire a Federal Reserve governor may be up to the courts now, but the Fed Board is unlikely to try to remove regional Fed bank presidents as some have speculated, Bullard said. 

The 12 Fed presidents are selected by their regional boards of directors, who continuously evaluate their chief executive and have the power to dismiss that person at will. That the Fed Board in Washington reappoints the presidents every five years is a "bit of a relic" of the Federal Reserve Act, Bullard said. 

"Suppose you did all that and the board just hires back the person they like, what do you do about that?" he said. "This commentary is being made by people who are not that close to how this actually works." 

While the Supreme Court will ultimately decide the legal parameters of a firing for cause, "I do think the intention of the Congress in passing the Federal Reserve Act is it would be hard to fire a member of the Board," Bullard said. 

Congress could also legislate a process by which they themselves remove Fed governors, similar to the two-thirds vote required to impeach a federal judge, Bullard said. "You would have a safety valve if the person really wasn't doing the work."