Fed’s Bullard says inflation ‘could get out of control,’ so action is needed now

James Bullard
Olivia Michael | CNBC

NEW YORK — St. Louis Federal Reserve President James Bullard cautioned Thursday that without central bank action on interest rates, inflation could become an even more serious problem.

He said that “we’re more at risk than ever in a generation” during a Columbia University panel discussion. We would see inflation rise even further if we had a surprise in the future that we don’t know about. We want that to never happen.

Bullard made recent news with his calls for aggressive Fed action. To stem the price spikes, which are at an all-time high in recent years, he advocated for full rate hikes by July to ensure that prices do not rise as fast as they have in 40 year.

Bullard reiterated his belief that the Fed should “frontload” rate increases in order to stay ahead. inflation running at a 7.5% clipOver the last year.

Fed officials were resisting tightening policies, insisting that last year’s price spike was caused by pandemic-specific factors such as congestion in supply chains and a large demand for goods and services. This would diminish over the years.

Bullard claimed that overall, there was too much focus and too many mindshare on the belief that inflation would eventually go away. There is a risk that inflation will not subside. 2022 will mark the second consecutive year with very high inflation. Given this, we believe the Fed must act faster and more aggressively in order to combat inflation than it would under other circumstances.

Fed indicated that it is likely to start raising interest rates in MarchIt would represent the first major increase in three years. The markets will be looking for five to six additional increases, each in increments 25 basis points. The basis point corresponds to 0.011%.

Bullard stated that the forthcoming change in policy should not be seen as an effort to limit the market and economy.

It is not strict policy. He said, “Don’t believe anyone telling you that it’s strict policy.” It’s the removal of accommodation which will show that we are taking our responsibility seriously.”

In the wake of Wednesday’s rate rise announcement, market prices have been cooling. the January meeting minutesFederal Open Market Committee indicated that government officials were looking for a moderate approach to the end of policy support.

Traders now point to a 25 basis point increase in March, after originally looking at a 50-basis-point move. according to CME data. The probability for seven hikesAfter a week of close to 70%, Thursday’s decline was 43%.

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