Fed: Bullard does not rule out… a rate hike of 75 basis points!

(Boursier.com) — St. Louis Fed chief James Bullard told CNBC that he wouldn’t rule out a 75 basis point rate hike, even though it’s not his baseline scenario for the May FOMC meeting (May 3-4). Bullard also said the Fed did not want to disrupt markets, but needed to act quickly. He said a benchmark rate of 3.5% was the minimum the Fed needed and that it should try to achieve it by the end of the year. Bullard also touched on the ‘soft landing’ theme, saying he doesn’t think unemployment will rise and may fall further as the Fed raises rates, eventually falling below 3%. This year. He also said GDP growth this year and next would be “above trend.”

For the time being, the markets are counting on rate hikes of 50 basis points at the next monetary meetings of the Fed. The CME’s FedWatch tool shows a nearly 91% chance of a 50bp hike in May, then a roughly 94% chance of a further 50 or 75bp tightening in June.