St. Louis Federal Reserve President James Bullard said on Friday that the United States remains in a position to see disinflation in 2023. They will see if the Fed may need to react more. He sounded optimistic, by saying the he expected the Fed to be dealing more with the strong economy in the coming months and not worrying as much about financial stresses.

Bullard sees an “80% chance” that financial stress will abate, and the discussion will shift back to inflation. According to him, the other outcome with a lower probability, is a recession. He cautioned that there could be downside risks if financial stress worsens.

The probability of a global crisis from recent stress is low, said Bullard. He mentioned that the Fed will continue to monitor the situation closely and will take appropriate action if necessary.

St. Louis Fed President argued that in response to the strong economy, the terminal rate for this year was raised by 25 basis points to a range of 5% to 5.75%, taking the assumption that financial stress subsides.

Regarding the interest rate path, Bullard said the projections suggest one more rate hike that could be at the next FOMC meting or soon after.

Fed's Bullard: Swift response to bank stress allows monetary policy to focus on inflation