Bullard: The Fed needs to raise interest rates by more than 3% this year

The president of St. Louis Fed, James Bullard said today that the US Federal Reserve will have to raise its key interest rate by more than 3% – which means 12 interest rate hikes of 25 basis points at a time – to convince the public that it is determined in the fight against inflation, as broadcast by CNBC.

The official was the only one who differed in the last meeting of the central bank this week that decided on a slight increase in interest rates by 25 basis points.

In a statement, Bullard said he would like to see the central bank’s key interest rate rise above 3% from its all-time low in recent years until Wednesday.

“This would quickly adjust the interest rate to a more appropriate level for the current conditions,” he notes.

In the forecasts released by the Fed on Wednesday, after the monetary policy decisions, the officials “see” another six interest rate increases this year, leading the interest rate to 1.75%. Wednesday’s increase by 25 basis points was the first increase since December 2018.

Bullard was the member of the commission that voted against the move, backing a 50 basis point increase. The official also said that the central bank should have already started reducing its bond portfolio, which is approaching 9 trillion. USD

“The impact of excessive inflation is heavier on people with low incomes and wealth and on people with limited ability to adjust to rising costs of living,” Bullard said in a statement. “Combining strong real economic performance and unexpectedly high inflation means that the interest rate is currently too low for effective macroeconomic management. ”