WELCOME BACK, CARTER: Fed official sees first interest rate hike next year, not in 2023, thanks to inflation.

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Fed official sees first interest rate hike next year, not in 2023, thanks to inflation

St. Louis Federal Reserve Bank President James Bullard sent markets tumbling on Friday when he predicted an interest rate hike in late 2022, earlier than the central bank consensus.

Bullard, who has led the St. Louis Fed since 2008, said that inflation has been running hotter than the Federal Reserve had anticipated. His remarks come the same week the Fed revised its economic numbers, predicting higher inflation by year’s end.

“The inflationary impulse, I think, is more intense than we were expecting,” Bullard said Friday morning on CNBC.

On Wednesday, central bank officials projected that they would begin raising rates by 2023. Inflation fears are percolating among some economists, and consumer prices increased 5% for the year ending May, according to a report released last week by the Department of Labor — the largest 12-month increase since August 2008.

LARRY KUDLOW: Is Jimmy Carter Back, or What?

What a minute, though conservatives might hate me for this. President Carter really, truthfully, factually did not launch double-digit inflation of the 1970s. He was merely captured by it, and his presidency was destroyed. I don’t think he really ever understood it. It wasn’t just about oil prices. He did, though, appoint Paul Volcker to run the Fed.

Volcker was my former boss at the New York Federal Reserve Bank. I was his executive assistant 46 years ago. It was Paul Volcker, under President Reagan, who slew inflation. Reagan gave Volcker the ground to stand on. The truth, though, factually and analytically is that the president who unleashed double-digit inflation was Richard Nixon.

That’s right. It was unfortunately the 37th president who closed the gold window where the dollar was exchangeable for gold at a 35th of an ounce. That went back to the post-war deal reached at Bretton Woods, New Hampshire. It restored to the world economy the gold exchange standard with the dollar at the center of that system.

 

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h/t Ed Driscoll

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