Fed's Bullard Reaffirms the Importance of Aggressive Rate Hikes

Fed President St. Louis made another very hawkish statement. According to him, US inflation is in dire need of a rate hike at a fast and massive rate.

Fed President St. Louis, James Bullard, reiterated the importance of the Fed's rate hike at a faster pace. According to him, US inflation data for four consecutive months should have been able to guarantee a more aggressive monetary tightening policy. After all, the central bank already needs to "ratify" market expectations about its next policy.

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"It's clear that (the inflation data) for October, November, December, January, is unlikely to moderate naturally in a reasonable time frame without the Fed taking action," Bullard said in an interview with CNBC tonight (14/February), "Our credibility is in the spotlight here, and we have to react to the data. However, I strongly think that we can do it in an organized and non-market-disruptive way."

Bullard is proposing a 100 bps increase for the year, with a composition of a 50 bps increase in March and two 25 bps hikes at the next FOMC meeting. "I feel that we have urgently needed to be more aggressive towards plans to remove accommodation than before. We are surprised at the rise in inflation. This is already too much inflation," Bullard said.

The very hawkish sentiment from the Fed officials also pushed the yields on US Treasury bonds and the US Dollar. The US Dollar Index is up 0.41% to 96.4 at press time.

“It is clear that we are still in for a shock after last week's inflation report and St. Louis Fed President Bullard's comments,” said analyst Karl Schamotta of Cambridge Global Payments in Toronto. -loaded)."

Other Fed Officials Are Not As Aggressive As Bullard

Bullard's argument doesn't seem to have garnered much support from other Fed officials. They even seem to disagree about the magnitude of the increase in interest rates.

In an interview with SiriusXM radio, Richmond Fed President Thomas Barkin said that now is the right time to start raising interest rates. However, the specifics depend on how inflation will be in subsequent reports.

Meanwhile, Kansas City Fed President Esther George told the Wall Street Journal that she wanted a systematic monetary tightening plan. However, the person who currently has voting rights in the FOMC is not sure to immediately start with a 50 bps increase.