Bullard: The Fed needs to be more aggressive

The president of the Federal Reserve Bank of St. Louis, James Bullard said today that the tightening of monetary policy in the US should move quickly to stop the upward pressure on already high inflation, while reiterating his call for an increase in interest rates above 3% this year.

“The Fed needs to be more aggressive in controlling inflation,” Bullard told Bloomberg Television in an interview. “We need to take at least a neutral stance so that we do not put upward pressure on inflation at this time when we have much higher inflation than usual in the US.”

The Fed decided last week with an 8-1 vote to raise its key interest rate by 25 basis points. This was the first rate hike since 2018. Bullard was the only member of the commission to disagree, calling for a 50 basis point increase.

THE Fed Chairman Jerome Powell said Monday that the central bank is ready to proceed with a more aggressive increase by 50 bp. at the next meeting on 3 and 4 May, if conditions so require.

Asked how fast the Fed should move, Bullard said “the faster, the better” adding that “the 1994 tightening cycle or the removal of the easing stop [της νομισματικής πολιτικής] is probably the best ratio in this case “.

From 1994 to early 1995, the Fed, led by Alan Greenspan, raised interest rates from 3% to 6%, achieving a “smooth landing” of the economy, with inflation limited and growth rates slowing. They remained strong, followed by a decade of continuous growth that was the largest in history up to that time.

Powell cited yesterday’s speech at the time as an example of the Fed’s goals.

“History teaches us that the faster we move … the better our chances of driving inflation to target and sustaining economic growth,” Bullard said.

“We came out of the pandemic and we were surprised by inflation. But what needs to be done now is to raise the interest rate quite a bit – without disturbing the economy, so I think [μια αύξηση κατά] 50 p.m. it should definitely be in our quiver “.