Bullard is in favor of Fed raising rates above 3% this year

(Bloomberg) The president of the Federal Reserve Bank of St. Louis, James Bullard, said he disagreed at this week's meeting because he wanted the US central bank to implement a balance sheet reduction plan, in addition to a half-percentage point increase, adding that he is in favor of raising rates this year. more than any of his colleagues.

“I recommended that the committee try to achieve a level of the monetary policy rate above 3% this year. This would quickly adjust the rate to a level more appropriate to the current circumstances,” Bullard said Friday in a statement. “In my view, raising the target range to between 0.50% and 0.75% and implementing a plan to reduce the size of the Fed's balance sheet would have been more appropriate actions,” for this week's meeting.

Monetary policymakers of the Federal Open Market Committee (FOMC) voted 8-1 on Wednesday to raise interest rates for the first time since 2018 by a quarter point, while the country faces the highest inflation in four decades. The increase brought the target range for its reference rate to between 0.25% and 0.5%.

Bullard's dissent for a half-point increase was the first vote against a decision since September 2020.

“The combination of strong real economic performance and unexpectedly high inflation means that the committee's policy rate is currently too low to handle the US macroeconomic situation wisely,” said Bullard. “The committee will have to act quickly to address this situation or it will risk losing credibility in its inflation target.”

Other FOMC members are expected to give their impressions on Friday, including Governor Christopher Waller, as well as Minneapolis Fed President Neel Kashkari and Richmond Fed Chief Thomas Barkin. Powell's giving a speech on Monday.

The FOMC “dot plot” showed in its economic forecasts that monetary policymakers are aiming for rate increases at each of the six remaining meetings in 2022, with the median projection of a quarter point each time. With nearly half of FOMC members looking to go even faster, that would mean a half-point increase sometime during the year.

Bullard's opinion reveals that he had the highest forecast for rates this year and has the only point above 3% on the chart.

“US monetary policy has been relaxed even more without realizing it because inflation has risen sharply while the benchmark rate has remained very low, which has pushed real interest rates down in the short term,” Bullard said.

The last time the Fed raised rates by half a point was in 2000. Officials will meet on 3 and 4 May.

Original Note:

Bullard Says He Favors Fed Raising Rates Above 3% This Year (2)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.