St. Louis Fed President James Bullard reiterated yesterday that interest rate has to be raised to at least 5.00-5.25%, from the current 3.75-4.00%, to be “sufficiently restrictive” to curb inflation. The interest rate will have to stay at that level “all during 2023 and into 2024”.
But regarding the size of the next hike in December, Bullard said he would leave the exact tactics to Chair Jerome Powell. “In macroeconomic terms I’m not sure it matters that much at exactly which date we get there or what meeting we get there (the terminal rate)”, he said. “Generally speaking I have advocated that sooner is better, that you do want to get to the right level of the policy rate for the current data and the current situation, but I would defer to the chair as to how he wants to play the tactics on this.”
“I do think that the fact that the labor market is so strong gives us license to pursue our disinflationary strategy now and try to get the inflation under control right now so we don’t replay the 1970s where the FOMC at that time took 15 years to get inflation under control,” Bullard noted.