President of the St. Louis Federal Reserve James Bullard argued for accelerating the pace of the fight against inflation on Wednesday. Bullard expressed confidence that the central bank can defeat inflation.
According to Bullard, a more aggressive interest rate increase now would provide the Federal Open Market Committee, which sets interest rates, a greater chance to lower inflation, which, despite having fallen somewhat from the perilous levels of 2022, is still high.
“The phrase “let’s slow down and feel our way to where we need to go” has gained popularity. During a live “Squawk Box” interview, he remarked, “We still haven’t arrived at the point where the committee established the so-called terminal rate. “After you reach that point, use your senses to navigate and determine what needs to be done. Since the following move could be up or down, you’ll know when you’re there.
These remarks follow a week in which Bullard and Loretta Mester, the president of the Cleveland Federal Reserve, both said that they had pushed for a half-point rate hike at the previous meeting rather than the quarter-point increase that the FOMC ultimately decided to implement.
They declared that they would support a more forceful action in the March conference. Following those comments and a set of inflation data that came in stronger than anticipated, the markets have been erratic, fueling concerns that the Fed still has work to do to lower prices.
Bullard, however, asserted that the more forceful action would be a component of a plan that he believes will ultimately succeed.
He replied, “If inflation keeps going down, I think we’ll be alright.” Our current danger is that inflation will not slow down and instead resume its upward trend. We’ll need to respond, and if inflation doesn’t start to decline, you know, you run the risk of a repeat of the 1970s, when you had 15 years to deal with the drag. You don’t want to go into that situation. Let’s act quickly and bring inflation under control by 2023.
According to CME Group data, markets continue to mainly anticipate the Fed to stick with the quarter-point hike next month despite the tougher language and scorching inflation figures.
The benchmark short-term borrowing rate, according to futures trading, is expected to peak this summer at a “terminal” level of 5.36%, which is higher than the 5.1% estimate committee members gave in December but about in line with Bullard’s forecast of a 5.375% rate.
Investors worry that increasing rates would push the nation into a recession. The greatest sell-off of the year in major averages occurred on Tuesday, wiping out all of the gains the Dow Jones Industrial Average had gained in 2023.