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Wednesday, May 25, 2022

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

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(Bloomberg) — Federal Reserve Bank of St. Louis President James Bullard said he dissented from this week’s meeting because he wanted the U.S. central bank to implement a plan to reduce the balance sheet, in addition to a increase of half a percentage point, adding that he favors 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 for the current circumstances,” Bullard said in a statement Friday. “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.

Policymakers at the Federal Open Market Committee (FOMC) vote 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 benchmark rate to between 0.25% and 0.5%.

Bullard’s dissent in favor of a half-point raise was the first vote against a decision since September 2020.

“The combination of strong real economic performance and significant unexpectedly high inflation means that the committee’s policy rate is currently too low to prudently manage the US macroeconomic situation,” stated Bullard. “The committee will have to move quickly to address this situation or risk losing certainty in its inflation target.”

He was there, other FOMC members gave their impressions on the fournes, including Governor Christopher Waller, as well as Minneapolis Fed President Neel Kashkari and Richmond Fed Chief Thomas Barkin. Powell will give a speech on Monday.

The FOMC’s “dot plot” showed in its economic forecasts that policymakers are targeting rate hikes at each of the remaining six meetings in 2022, with the median projection being a quarter point each time. Given that almost half of the FOMC members are looking to go even faster, so that would imply a half point hike at some point in the year.

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

“US monetary policy has inadvertently been loosened further because inflation has been perceived as strong while the benchmark rate has remained very low, which has pushed real short-term interest rates down. deadline,” Bullard said.

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

original note:

Bullard says he is in favor of the Fed raising rates above 3% this year (2)

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