US: Fed’s Bullard Sees Rate Hike Now, Assess Situation Later

Saint Louis Federal Reserve (Fed) President James Bullard declared that he is in favor of raising interest rates at the US central bank meeting in March and probably again in May.

However, he opposed the idea of ​​starting the tightening cycle with a half percentage point hike, saying the level the Fed will ultimately need to raise rates to is a “open matter”.

“The point of this is that (monetary policy) is in a better position now and in the coming months, and then we can assess, at that time, whether we need to do more or not.“, He said Bullard to Reuters in an interview on Twitter Spaces.

As the fed As the end of two years of near-zero rates approaches, Bullard noted there will likely be less guidance for investors on the future path of rates.

“We are going to have to be more agile, faster, react better to inflation data and other developments as we go into this year.“, He said Bullard. “It’s going to be a more data dependent environment”.

Even so, Bullard – one of the 16 Fed policymakers who sets interest rates – gave a kind of road map on what he expects in politics and economics.

As for the $9 trillion Fed balance sheet cut, Bullard said he would like to start in the second quarter and believes that “the reduction may be faster than last time.”

Both the rate hike and balance sheet reduction are expected to raise borrowing costs and slow growth, pushing down what is now the highest inflation in 40 years.

“We are aware of the problem of inflation, we move on the official interest rate, but we are also going to move on the balance sheet, so we are not that far from neutral if they are willing to consider bothBullard said.

If necessary, he added, the fed it could use both levers to end up slowing down the economy.

In addition, he said, the US unemployment rate – now at 3.9% – could fall to 70-year lows.

“I think unemployment is going to drop below 3% this year”, Bullard said, noting that the companies he speaks with are doing well and are looking for workers. “I think the next jobs report probably won’t be very good because of omicron, but don’t be fooled. This is a pretty strong economy and a very strong job market.”