st. Louis Fed Chairman James Bullard said in his statement that the central bank had a good interest rate plan to rein in rising inflation.
In addition, Bullard said that the Fed’s expected tightening-based market pricing helped keep inflation under control.
“Interest Rates May Rise To 3.5 Percent By The End Of The Year”
Speaking at a virtual meeting organized by the Foreign Relations Council, Bullard emphasized that interest rates should be increased to at least 3.5% by the end of this year. Such an increase would require an increase of 300 basis points from the current 0.50% rate.
Bullard also said that he would not rule out a 75-point increase, but that this is not the base case. According to Bullard, this is much more than the typical 25 basis point increase applied by the Fed.
FED’s Bullard: No more than 50 basis points increase is expected at any meeting in base case.
I will not ignore the 75 basis point increase. However, this is not the basic situation.#Bitcoin
— Bitcoin System (@bitcoinsystem) April 18, 2022
Bullard had indicated 3 percent for the end of the year in his previous statement
These latest statements by Bullard have been harsher than the 3% statement on the Fed’s interest rates last month.
In addition to the Fed’s aggressive policy of raising the rate, Bullard said that if inflation doesn’t drop as they expected, they can shrink the balance sheet faster as a plan B.
According to CME Group’s FedWatch tool, markets are giving an 88.8% probability in favor of the Fed’s 75 to 100 basis points increase at the May meeting.
Bullard continued his statements on the subject as follows:
“Thanks to interest rate hikes, inflation expectations will decrease and we will be able to reduce inflation without harming the labor market.”
Bullard also stated that he thinks the unemployment rate will fall below 3% this year.
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