Browse By

Bullard (Fed) insists on a forceful rate hike before the summer in the US

The president of the Federal Reserve Bank of Saint Louis, James Bullard, warned on Monday that the credibility of the Fed is at risk due to the high inflation that the country is experiencing in recent months.

Bullard (Fed) insists on a forceful rate hike before the summer in the US

Bullard (Fed) insists on a forceful rate hike before the summer in the US

“Our credibility is on the line here and we do have to react to the data. However, I do think we can do it in a way that’s organized and not disruptive to markets,” Bullard said during an interview on the American television network CNBC.

Bullard has maintained his stance that he would prefer a rate hike of up to 1 percentage point by July 1. This would mean an increase in the three Fed meetings scheduled before the summer, as well as an increase of more than 25 basis points in at least one of them.

“I do think we need to front-load more of our planned removal of accommodation than we would have previously. We’ve been surprised to the upside on inflation. This is a lot of inflation,” the central banker stressed.

In this sense, Bullard has argued that the inflation data of the last four months have questioned any idea that the rise in prices was going to moderate in a reasonable time horizon “without any action from the Fed”. The US central bank is scheduled to meet between March 15 and 16. As indicated by several central bankers of the organization, the rate hikes will begin at said meeting.

The January Consumer Price Index (CPI) showed a 12-month increase of 7.5%, even more than Wall Street estimates and continuing a pattern that began in the second half of 2021.

“My interpretation was not so much that report alone, but the last four reports taken in tandem have indicated that inflation is broadening and possibly accelerating in the U.S. economy,” he said.

Even with sharp increases in inflation, real earnings have mostly declined as inflation is outpacing the increase in average hourly earnings.

“The inflation that we’re seeing is very bad for low- and moderate-income households. People are unhappy, consumer confidence is declining. This is not a good situation. We have to reassure people that we’re going to defend our inflation target and we’re going to get back to 2%”, the governor assures.

Leave a Reply

Your email address will not be published.