St. Louis Fed President James Bullard reiterated the need for more rate hikes to combat persistent inflationary pressures. He stated, “I think we’re going to have to grind higher with the policy rate in order to put enough downward pressure on inflation and to return inflation to target in a timely manner.”
“I’m thinking two more moves this year – exactly where those would be this year I don’t know – but I’ve often advocated sooner rather than later,” he added.
According to Bullard, Fed’s March median forecast, which suggested rates peaking at 5.1%, was predicated on a slowing U.S. economy and rapidly falling inflation. Instead, he noted, the economy has exhibited robust growth and inflation has not been abating as swiftly as hoped.
With this unexpected scenario in play, Bullard cautioned about the risks of inflation not subsiding to lower levels. Referring to the buoyant labor market, he emphasized, “As long as the labor market is so good it is a great time to get this problem behind us and not replay the 1970s.”
