February 8, 2023

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The Fed still has “a long way to go” on rate hikes, says Reuters’ Bullard

©Reuters. FILE PHOTO: St. Louis Fed President James Bullard speaks about the U.S. economy during an interview in New York February 26, 2015. REUTERS/Lucas Jackson

(Reuters) – The Federal Reserve needs to raise interest rates quite a bit more and then hold them there over the next year and into 2024 to bring inflation under control and bring them back to the Federal Reserve’s 2% target, the St. Louis Fed, US President James Bullard said on Monday.

“We still have some way to go to turn hawkish,” Bullard said in an interview with MarketWatch, while reaffirming his belief that the Fed’s interest rate should be at least within a range of 5.00% to 5.25% from current Value must rise from 3.75% to 4.00% level deemed “sufficiently restrictive” to bring down inflation.

Once interest rates are at a sufficiently high level, given the historical behavior of inflation, “they need to stay there all through 2023 and into 2024,” Bullard said.

The Fed has hiked interest rates by 375 basis points this year, the fastest rate of tightening since the early 1980s as it tries to quell stubbornly high inflation. The central bank’s preferred measure of inflation is more than three times the Fed’s target.

“We want to get this inflation under control much sooner than we did in the 1970s,” Bullard said, noting that he prefers to raise interest rates in the short term to set the conditions for inflationary pressures to ease over the next year.

However, Bullard also reiterated comments earlier this month that he would let Fed Chair Jerome Powell decide how much higher rates to hike at forthcoming monetary policy meetings.

Investors are overwhelmingly expecting the Fed to hike interest rates by half a percentage point at its next monetary policy meeting on December 13-14.