June 24 (Reuters) – The U.S. Federal Reserve must fearlessly raise interest rates to contain inflation and prevent inflation expectations from anchoring, St. Louis Fed Chairman James Bullard said on Friday. .
“We must act in a direct and offensive way to allow a reversal of the trend of inflation and to regain control of it (..) otherwise we could experience a decade of high and fluctuating inflation”, he said during of a debate on central banks and inflation organized by UBS in Zurich, Switzerland.
“So act fast now, get inflation back under control quickly and bring inflation back to the 2% path,” he added.
The Fed last week raised its main policy rate by three-quarters of a point, its biggest hike since 1994, to 1.50%-1.75%, and its forecasts suggest it could reach 3.4 % at the end of the year.
James Bullard repeated on Friday that he would like to see the “fed funds” rate rise to 3.5% by the end of 2022, explaining that the central bank could consider reducing the cost of credit once inflation subsides.
He also played down the risk of a recession in the United States, explaining that the rise in rates would undoubtedly bring growth back towards its long-term trend but not below it.
“We are in the early stage of an expansion phase in the United States (..) Unless we are hit by a shock, it would be unusual to fall back into recession at this stage,” he said. . (Report Lindsay Dunsmuir, French version Marc Angrand)