We asked a Federal Reserve board member 12 questions - here is what he said

The Federal Reserve decided last week to not hike rates — but St. Louis Federal Reserve Bank President and CEO James Bullard isn’t buying the argument.

He has railed against the Federal Reserve’s strategy, saying the central bank is playing bad baseball.

He’s the Federal Reserve’s last remaining true ‘hawk’, meaning that he is intent on raising rates.

He will sit 2016 will sit on the Federal Open Market Committee, where he’ll have a say in monetary policy. FOMC seats rotate between each of the regional Federal Reserve Banks, and this year, he’s an alternate on the committee.

Bullard visited Business Insider’s New York headquarters and sounded off on a number of topics, from cyber security to global factors challenging the Fed to House Republicans to step up pressure on the central bank.

We’ve edited Bullard’s responses for clarity below.

The Fed should lift rates now

The unemployment rate has fallen to levels that suggest the Federal Reserve has met its target -- or is at least very close.

Business Insider: Why is now the time to raise rates?

Bullard: 'It's not complicated. If you look at the goals of monetary policy; they're maximum employment and inflation. We've basically achieved everything that we can achieve with monetary policy.

'The policy rate is near zero, where it's been for close to seven years now. That's not the normal rate. The committee thinks the normal rate is 350 basis points so we've got a long, long way to go to get the policy rate up to something normal.

'I think that the case is compelling and I'm concerned that the debate has drifted toward even small moves being construed as tightening monetary policy. That isn't the case.'

It is all about inflation

Wage growth has crept up since the financial crisis -- but not to prior levels.

Business Insider: Which is more important for liftoff in rates: wage growth, unemployment, or inflation?

Bullard: 'Of those three, by far the most important by far is inflation. Inflation is running low right now. A lot of that is because oil prices. But low oil prices are ultimately a bullish factor for the US economy. For that reason you might want to try to look through the low prices of oil today, and instead be looking to a measure like the Dallas Fed trimmed measure mean inflation rate, which is running at 1.6%.

Certainly, you want everyone to get paid as much as possible, but wages are going to be a trailing factor. Another thing about wages, especially looking at nominal wages, there's a productivity factor in there because … your wage could go up because productivity was higher, or because of inflation. Both of those factors have been low and wage growth has been low in response to that.

'On growth, growth forecasts for 2015 were upgraded at the last meeting from where they were previously. We previously had a picture of the first half of 2015 that was fairly weak but now we have a picture of the first half of 2015 that was actually at trend or even a bit above trend, for growth.

'I expect continued growth, above trend growth, in 2016 and 2017. That's why I'm being a little more aggressive in saying we're at an inflection point for the US economy.

'Labour markets are now going to start to get very tight. Inflation's going to return to target and our policies are a long ways out of position compared to where we should be.'

Unemployment could drop to 4%

XE.com
The US dollar has strengthened in recent years.

Business Insider: What will happen when rates increase?

Bullard: 'I think as we increase interest rates, I would expect continued labour market improvement. The unemployment rate will head down into the 4% range, possibly into the very low 4% range over the forecast horizon. That's already baked in the cake because the committee has already committed to a low path of interest for this stage of the business cycle. I think there will be continued improvement on those dimensions.

'On the dollar, if the US is the strongest economy in the world you're going to see a stronger dollar. That's unpredictable, because other economies can surprise to the upside. Sometimes that will strengthen their currency and weaken the dollar. It's unclear what the ramifications would be for the dollar.'

The equity rally is complete

The S&P has roared past pre-crisis highs

Business Insider: How would a rate rise impact the equity market?

Bullard: 'For equities, the process of coming out of the 2009 lows and rallying over the last six years to more normal levels, that process is complete.

'From here, it's really a matter of equities trying to assess the future of the US economy, assess future value of the corporate sector. That's what'll drive equities going forward.

'From 2009 up until ... a year ago, there was a tailwind behind equities because they had to come back up normal valuations after being substantially depressed during 2009.'

Those who want comment on monetary policy have to put their argument on the table

CNBC.com
Jim Cramer, who Bullard criticised in a television appearance earlier this week.

Business Insider: You're taking on market commentators who are calling for 0% rates on a prolonged basis. But are the biggest investors -- institutional investors -- really paying them any mind?

Bullard: 'Everyone that wants to comment on monetary policy has to put their argument on the table and has to be able to defend this arguments.

'I'll push back against those that think there's some kind of a big mistake being made by normalizing interest rates.

'I think prudent monetary policy would be to return our policy settings to normal from their very extreme and emergency levels that we're seeing today.

'Again: the economy is practically right at the goals we set for the committee but the policy settings haven't budged one inch from where they were at the height of the crisis.'

What is going on in China isn't that important

MarketWatch
The volatility of the Chinese stock market isn't that big of a deal to the Federal Reserve, Jim Bullard said.

Business Insider: What is the international factor that worries you most as it pertains to your job and the decisions you'll make?

Bullard: 'The US economy is not as exposed to emerging market concerns as individual companies are. Individual companies will sometimes be driving 50%, 60% of their profits from somewhere overseas. Those guys have to be very concerned developments in the countries in which they operate, including China, aren't going the way they planned.

'For the US as a whole we're a big diversified economy. The per cent of our economy that's exposed to international concerns is probably only 10-15%.

'You do put some weight on international factors. But not that large a weight.'

Cyber security is a big deal

Business Insider: Other Fed Presidents have pointed out the importance of cybersecurity standards in stress tests. Where does that rank, on your list of priorities?

Bullard: 'Within the Fed, I'm actually the head of the technology oversight committee. We do worry about cybersecurity all the time; the Fed is a target and we try to be as good as we can be in thwarting efforts to attack our information or attack the Fed more generally. It's certainly a very important issue, it is part of the regulatory process.'

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