Federal Reserve Bank President Pushes for Faster Rate Hikes – James Bullard, the president of the Federal Reserve Bank of St. Louis, has called for more aggressive steps to battle inflation and shrink the Fed’s balance sheet.
“Excessive inflation burdens persons with low incomes and wealth, as well as those with limited ability to respond to growing costs of living,” he emphasized.
President of the Federal Reserve Bank of St. Louis, James Bullard, made a statement on Friday in response to his dissenting vote at the Federal Open Market Committee (FOMC) meeting last week.
The FOMC opted to “increase the target range for the federal funds rate by 25 basis points to 0.25 percent – 0.50 percent” at the meeting, according to Bullard, who added:
“Raising the goal range to 0.50 percent–0.75% and developing a plan to shrink the Fed’s balance sheet, in my opinion, would have been more suitable steps.”
Bullard is the president of the Federal Reserve Bank of St. Louis, which he has led since 2008. “A 50-basis-point upward change to the policy rate would’ve been a better decision for this meeting,” he said again.
The FOMC, he added, “has a mandate to ensure stable prices for the United States economy and a 2% inflation target specified in terms of headline PCE (personal consumption expenditures price index) inflation.”
“The committee is missing its target by 410 basis points on the headline measure and 320 basis points on the core measure,” the St. Louis Fed president said, noting that “headline PCE inflation measured from one year ago is currently 6.1 percent, and the associated core PCE inflation rate, which ignores food and energy components, stands at 5.2 percent.”
He expressed his opinion as follows:
“People with small earnings and possessions, as well as those with limited ability to adjust to growing costs of living, bear the brunt of high inflation.”
“The policy rate set by the committee is currently far too low to sensibly manage the macroeconomic situation in the United States.” Because inflation has risen substantially while the policy rate has stayed very low, pushing short-term real interest rates lower, US monetary policy has been unknowingly eased further,” Bullard explained, emphasizing:
“If the committee does not act promptly to address this predicament, it will lose trust in its inflation target.”
Bullard went on to say:
“I suggested that the committee aim for a policy rate of more than 3% this year. This would allow the policy rate to be promptly adjusted to a more appropriate level for the current situation.”
According to predictions submitted in conjunction with the meeting last week, ten FOMC members expect the fed funds rate to be 1.75 percent to 2% by the end of the year. Eight people, on the other hand, believe it should be higher, with the top projection predicting a range of 3% to 3.25 percent.