Interest Rates Are Tight Enough, Recession Talk Is Exaggerated And Regional Bank Crisis Manageable: Fed's Bullard

Speaking to the Economic Club of Minneapolis on Friday, St. Louis Fed President James Bullard noted that the present level of interest rates is in the "sufficiently restrictive" territory according to the committee. He added that the chance of a soft landing exists by labeling recession talks as greatly exaggerated. 

Bullard supported the most recent Federal Open Market Committee (FOMC) interest rates decision and said that a quarter percentage point increase was a good step in May. 

The official also commented on the regional bank stress, stating that the industry will be fine and that bank pressures can be controlled.

Strong Labor Market Reduces Recession Risks: The policymaker noted "Wall Street seems to be betting heavily on a recession scenario," and warned that investors should not factor in a recession as a base case. 

Bullard also stated that the April jobs report was stronger than expected, maintaining a very tight labor market, which will take time to cool. A robust labor market likely indicates continuing consumption, which boosts optimism in future growth.

Data released Friday by the U.S. Bureau of Labor Statistics showed an increase of 253,000 in total nonfarm payrolls in April, substantially above the predicted 180,000 surge. Average hourly wages climbed more than expected, by 0.5% from March and by 4.4% from a year ago, while the jobless rate dropped to a 50-year low of 3.4%.

Treasury Yields Rose After April's Jobs Report: Treasury yields climbed after the jobs data release, with the 10-year yield up 6 basis points to 3.43% and the yield on the two-year note rising by 12 basis points to 3.98%. 

The iShares 7-10 Year Treasury Bond ETF IEF, which tracks the performance of U.S. Treasuries with a remaining maturity between seven and ten years, fell 0.65%.  

Bullard is a well-known hawk among Fed members, but he will not have a vote in the FOMC's rate decisions this year.

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