St. Louis Fed President James Bullard has called for a sharp increase in the Fed’s interest rate to more than 3% this year, a step he sees as necessary to catch up with burdensome inflation.particularly heavy” for families.
In a statement explaining his disagreement with the approval of the Federal Reserve (fed) of a quarter-point increase this week, said the institution “you will have to act quickly to deal with this situation or you risk losing credibility in your inflation target”.
As he noted, he was not just in favor of a half-point hike this week, but hikes at a pace that would require half-point hikes in five of the remaining six Fed meetings this year.
“The US economy has proven to be especially resilient” in the face of the pandemic and geopolitical risks, he said.
With inflation above 6%, triple the Fed’s 2% target, Bullard indicated more central bank action is needed.to prudently manage the macroeconomic situation in the United States.
The pace of rate hikes he suggested is well above even what investors have priced into contracts linked to the fed funds rate.
The Fed on Wednesday approved the first rate hike since 2018, effectively ending its battle against the economic fallout from the pandemic to focus on reining in inflation.
Although most representatives of the fed see six rate hikes of more than a quarter point this year, seven of the current 16 Fed policymakers believe, like Bullard, that they should be increased further by the end of 2022.
Bullard has dissented four times since becoming St. Louis Fed president in 2008, including three times under current chairman Jerome Powell.
Source: Gestion
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