Bloomberg Talks
Former St Louis Fed President Jim Bullard Talks Warsh's Nomination Process
11 Mar 2026
Chapter 1: What is the main topic discussed in this episode?
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The Republican Senator Tom Tillis praising Fed Chair nominee Kevin Walsh following their meeting yesterday, but not wavering on his promise to block any Fed nominations until the criminal probe into the current chair, Jay Powell, ends. The former St. Louis Fed President Jim Bullard joins us now for more. Jim, welcome to the program. Set the stage.
How difficult a moment is this for an incoming Fed chair? Yeah, so you just got to get through the nomination process first. And as I understand it, anyway, I don't think anything's going to happen. So nobody is going to be on the Fed board anytime soon the way this is going. The administration will have to come to some kind of deal. They don't seem to be talking about that.
So I think it's stalled for now. It's the second time we've had to deal with this, Jim. Before, it was largely in the president's hands. And for whatever reason, Biden stalled, he stalled, he stalled, and waited a long, long time to reselect, renominate Chair Powell for a second term.
And some people, even people who were on the committee at the time, said that's what stopped this Federal Reserve from hiking quickly enough to respond to the energy crisis and the inflation pandemic shock coming out of the pandemic. Now, Jim, I just wondered this time around how critical this moment actually is with a fragile labor market and pressure once again on inflation coming from energy.
Well, it's always critical, always lots of interesting things going on. I would say about this shock, it's not like the 70s. I mean, of course, this is going to bring up, you know, hearkening back to the 70s, but the U.S. is a leading oil producer today. It weren't at that time, so...
I think the recession threat from this shock is probably smaller than it would have otherwise been because you've got the supply side kind of offsetting demand destruction that could occur. And then on the inflation side, well, the Fed looks through oil price shocks anyway.
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Chapter 2: What challenges does Kevin Warsh face in the nomination process?
They look at core inflation. So there's only a small effect on core inflation from this. So it's really... whether inflation expectations would start to rise because markets would start to think that the Fed was going to accommodate this shock, which is what happened in the 70s. I don't think the committee's in much of a mood to do that. So I think it's a different situation.
Even though this is a really big shock, it's a different situation than what we saw earlier in the post-war era. Jim, what gives you confidence that there's enough momentum in the underlying economy to make this not an issue of demand destruction, not an issue of the consumer increasingly crimped? Yeah, I just think, you know, the shock would hit the U.S.
economy and that would be, you know, gas prices are certainly something that we all pay every day. So that has acted like a tax in the past. But you've also got a supply side, you know, being the world's leading oil producer, which is offsetting some of that. I would also say that we've, you know, we've seen actually higher oil prices in the past. 145, if I recall correctly, in 2008.
And in real terms, that would be over $200 a barrel. So that's a very different scenario. Markets are right to focus on, well, how long would this conflict continue to go on?
Chapter 3: How critical is the current moment for the incoming Fed chair?
You know, U.S. could withdraw at any point, saying it's declare victory and withdraw. So we'll see what happens here. We see, Jim, expectations over at the ECB as well as the Bank of England for a potential rate hike increasingly priced in in response to higher oil prices. Do you think that people will start thinking about the same here in the U.S. ? I don't know if they go that far.
I think more would have to happen before they go that far. I think the more likely scenario is that they just stay on hold longer than they otherwise would have in order to send a signal that they want to keep inflation under control. But again, it's the inflation expectations probably that matter more than the oil price movements directly.
Well, we already see airlines across Europe and Asia increasing fares. They're raising the fuel surcharges given what's going on in the war. Also in America, we are a farm-to-table society. All of our food comes because of petrol and gasoline on trucks. Isn't that going to be a problem for this Federal Reserve, not just the fact that gasoline prices this morning are closer to $4 a gallon than $3?
Yeah, I mean, it's going to be a problem for headline inflation, but the committee looks at core inflation. So the whole point of that is to say that they're not going to react to movements in food and energy prices that can be pretty transitory and have historically been pretty transitory. So what they want is the underlying trend in inflation
And you could look at core PCE inflation, which the committee likes, or Dallas Fed trim mean inflation, which throws out some of the high and low price changes that occur in the price change distribution. So, sure, yeah, people are really paying these things. It really does matter, yes. But when you're trying to make policy for the medium term, you've got to look through some of it.
Hey, Jim, it's good to see you. Always great to catch up. Jim Bullard there, the former St. Louis Fed president. The takeaway there, not much to see here. Seems to be the view of one Fed official, one former Fed official. This means you could be earning daily cash on just about anything, like a slice of pizza from your local pizza place or a latte from the corner coffee shop.
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Chapter 4: What impact does the criminal probe into Jay Powell have on Fed nominations?
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