Fed’s Bullard says front-loading could reduce rates by 2023

(Bloomberg) – James Bullard, president of the Federal Reserve Bank of St. Louis, says the central bank should raise interest rates in an aggressive series to push interest rates to 3.5% by the end of the year, which, if successful, could lower inflation. In 2023 or 2024 the policy leads to simplification.

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“I would say we should have 3.5% by the end of the year, more than some of my colleagues,” Bullard said in a Fox Business interview on Friday. “The more we can front-load and the more we can control inflation and inflation expectations, the better off we will be. Over the years – ’23 and ’24 – we have been able to reduce policy rates because we have kept inflation in check.

Bullard, who has been the most vocal of policymakers this year, reiterated his support for Fed Chair Jerome Powell’s plan to raise prices by half a point as part of an effort to cool inflation at Federal Open Market Committee meetings in June and July. The warmest since 1980. When asked about the 75 basis-point increase, Bullard said it could not be blown up as an alternative.

“We need to bring inflation under control, and I think we have a good plan to do that,” Bullard said. “Fifty basis points is a good plan for now. As always, we need to focus on incoming data on the economy and inflation. You can never make an iron fist in this business, but we’ll see how it goes. “

Bullard said the fall in the US stock market was not a surprise and was a partial response to high interest rates. On Friday the market sank further and briefly entered a bear market, commonly defined as a 20% drop. The Nasdaq index, dominated by technology stocks, has closed 29% this year.

“There’s been a lot of revaluation in the market,” Bullard said. “It’s partly because of the Fed, but partly because of what the prices were before the recession. You would expect that with the Fed’s rate hike, all of these resources would be worth trillions of dollars worldwide. “

Unlike many on Wall Street, Bullard says the recession is unlikely. The overall economy is likely to move forward with a 2.5% to 3% increase in GDP and an unemployment rate likely to fall below 3% by the end of the year. Growth is likely to be supported by stronger use as Americans begin to travel and gain more experience after the Kovid-19 epidemic, he said.

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