Inflation Alert! St. Louis Fed’s James Bullard backs two more hikes. Bullard would have central bank push interest rates up to 5.5%-5.75% range

by Dismal-Jellyfish

Sources:

www.marketwatch.com/story/feds-bullard-backs-two-more-hikes-359fb941:

St. Louis Fed President James Bullard on Monday said he would like to see two more quarter-percentage-point interest-rate hikes this year.

“I think we’re going to have to grind higher with the policy rate in order to put downward pressure on inflation,” Bullard said in a moderated discussion at the American Gas Association’s Financial Forum in Fort Lauderdale, Fla.

Bullard said that the timing of the rate hikes was uncertain but that he has been an advocate of raising rates “sooner rather than later.”

“You want to get the downward pressure while you can,” he said.

The Fed raised its benchmark rate by 25 basis points to a range of 5%-5.25% at its meeting in May. That matches the median forecast of Fed officials for the peak interest rate in this cycle.

Officials at the Fed are divided over whether to continue to hike rates at their meeting in mid-June or pausing to see how the economy is affected by lags from the rapid pace of hikes. Some officials don’t like the word “pause” and have described holding rates steady in June as a “skip,” because it underlines that they are not saying they are done raising rates.

The markets think the Fed is done with rate hikes and have even been pricing in rate cuts later this year.

Bullard said that the Fed’s forecast of no more hikes was based on its expectations of slower growth and a faster drop in inflation in the first half of the year than has been seen in subsequent data.

“Inflation is hanging up too high,” Bullard said.

ca.finance.yahoo.com/news/fed-bullard-sees-two-more-125651188.html:

Federal Reserve Bank of St. Louis President James Bullard said he expects the central bank will need to raise interest rates twice more this year to quell inflation.

“I think we’re going to have to grind higher,” he said Monday during a moderated discussion at an event in Fort Lauderdale, Florida. “I’m thinking two more moves this year,” he added, though he wasn’t sure when those increases would happen.

Bullard, known for his hawkish views in recent years, does not vote on the policy-setting Federal Open Market Committee in 2023.

Policymakers raised rates aggressively since early last year, bringing their benchmark to a range of 5% to 5.25% from near zero. They’ve slowed down this year, delivering three consecutive quarter-point hikes after raising at a faster clip for much of 2022, and some officials have signaled support for a pause at their June 13-14 meeting.

Fed’s Kashkari Says a June Rate Pause or Hike Is a ‘Close Call’

www.reuters.com/markets/us/bullard-rates-may-still-need-rise-another-half-point-this-year-2023-05-22/:

The Federal Reserve may still need to raise its benchmark interest rate by another half-point this year, St. Louis Fed President James Bullard said, suggesting that any decision to pause on any increase at the upcoming June meeting won’t mark a full stop to the Fed’s tightening cycle.

“The risk with inflation is that it does not turn around and go back to a low level,” Bullard said in remarks to the American Gas Association. “As long as the labor market is so good it is a great time to get this problem behind us and not replay the 1970s.”

Other Fed Governors saying more rate hikes likely:

Cleveland Fed Governor Loretta J. Mester:

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“And so the question, you know, in my mind is have we gotten to that rate yet? And at this point, given the data we’ve gotten so far, I would say no, I don’t think we’re at that rate yet.”

Fed Governor Philip N. Jefferson:

“if you are willing to widen your lens to include a more commonplace definition, then it is possible to conclude that current monetary policy is, in fact, “on track.”” “The bad news is that there has been little progress on core inflation.”

Richmond Fed Governor Thomas Barkin:

“I do want to learn more about what’s happening with all these lagged effects. But I also want to reduce inflation,” “And if more increases are what’s necessary to do that I’m comfortable doing that.”

Data supporting call for rate hikes:

Inflation Alert! Bureau Economic Analysis (BED) data shows Consumers & Governments Embark on Epic Spending Binge! The PCE price index (the Fed’s barometer for inflation and insists is going back to 2%) increased 4.9% in the first quarter of 2023, compared to +4.4% in the 4th quarter of 2022.

Inflation Alert! April 2023 Rental Report: The median asking rent was $1,734, up by $4 from last month and down by $43 from the peak but still $348 (25.1%) higher than the same time in 2019 (pre-pandemic).

TLDRS:

  • Another Fed talking head saying rates need to go higher to stop inflation.
  • Bullard would have central bank push interest rates up to 5.5%-5.75% range
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