Bullard (Fed) argues for raising rates above 3% this year

(Howard Schneider)

WASHINGTON, March 18 (Reuters) – James Bullard, chairman of the St. Louis regional branch of the U.S. Federal Reserve, said on Friday it was necessary to raise the central bank’s key interest rate to more than 3% this year against to an inflation which, according to him, constitutes a “particularly heavy” burden for households.

In a statement explaining the reasons for his vote against the quarter-point increase in the federal funds rate (“fed funds”) decided on Wednesday, he said that the Fed “will have to act quickly to respond to this situation, otherwise it would lose credibility on its inflation target”.

He adds that beyond the half-point rate hike he favored this week, he favors half-point hikes at five of the six other scheduled meetings. by the end of the year.

Such a rise would be even faster than that anticipated at this stage by the futures markets.

“The American economy has shown itself to be particularly resilient” in the face of the pandemic and geopolitical risks, writes James Bullard, but with inflation above 6%, three times the target set by the Fed, he judges that it must do more to “prudently manage the US macroeconomic situation”.

While a majority of Fed officials expect six more quarter-point rate hikes this year, seven of the 16 members of the Federal Open Market Committee (FOMC) agree with James Bullard that rates will need to rise even higher. by the end of December.

(Report Howard Schneider, French version Marc Angrand, edited by Jean-Michel Bélot)