Fed’s Bullard Says First US Interest Rate Hike Could Be in March

The Federal Reserve (Fed) could increase interest rates as of March and is now in a “good position” to take even more aggressive measures against inflation if necessary, stated the president of the St. Louis Fed, James Bullard.

The central bank agreed in December to end its asset purchases in March and laid the groundwork for the start of rate hikes that all, even the most dovish, policy makers now deem appropriate in 2022.

The Fed “is in a good position to take additional steps as needed to control inflation, including allowing a passive liquidation of the balance sheet, increasing the benchmark rate, and adjusting the timing and pace of subsequent rate hikes. reference, ”said Bullard.

An initial rate increase could be approved “at the March meeting. Subsequent rate increases during 2022 could be advanced or delayed depending on the evolution of inflation, “he said.

Projections released in December showed that half of Fed officials expect rate hikes of a quarter of a percentage point to be needed this year.

Inflation is now more than double the Fed’s 2% target, and Bullard noted that the country’s inflation “shock” means the central bank should be able to meet its targets for several years.

The December policy change came just as the omicron variant of the coronavirus was beginning to increase daily infection rates. But Bullard added that he does not believe the current wave of cases would divert the US economy or the Fed.

Approaches both goals

San Francisco Federal Reserve Chair Mary Daly said the US economy is “getting closer” to the central bank’s two targets of full employment and 2% inflation, at least in the short term.

“There is a short-term and long-term difference … balancing those things as we move into 2022 will be the tipping point for monetary policy,” Daly told a Bank of Ireland virtual event.

While the labor market “appears to be very strong,” she said, the economy is supporting millions of fewer jobs than before the pandemic, as women and older workers are kept out of the workforce due to constraints caused by the COVID-19.