A US central bank (Fed) official said on Thursday that another sharp rate hike seems necessary at the September meeting, as inflation is still very high and will take time to slow.
I lean at this stage, towards 75 basis points, or three-quarters of a percentage point, as in previous meetings, mid-June and end-July, declared in an interview with the Wall Street Journal the president of the antenna regional Fed of St Louis, James Bullard, known for his positions in favor of a restrictive monetary policy.
We should continue to move quickly towards a level of key rates that will exert significant downward pressure on inflation, underlined the official, who is among the voters this year on the Monetary Policy Committee (FOMC), decision-making body of the Fed. .
4% by the end of the year?
In other words, according to him, the Fed must continue, during its next meetings, to make strong increases in rates, until reaching the range of 3.75-4% by the end of the year.
We have relatively good economic data, and very high inflation, so I think it would be logical to continue raising the key rate and into restrictive territory, he justified.
I don’t really see why you want to drag out interest rate hikes into next year instead of doing them in 2022, Bullard added.
He stressed that he was not certain that inflation had peaked, despite the slowdown observed in July, and foresees a process of about 18 months to bring price pressures back to the Fed’s 2% target, with a trajectory probably jagged.
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The idea that inflation has peaked is a hope, but it’s not really, statistically, in the data at this stage, pointed out James Bullard.
He also anticipates growth in the second half, as the economy contracted in the first six months of the year, and believes that the labor market will also remain robust.
The minutes of the last Fed meeting, published on Wednesday, showed the intention of the monetary committee to continue raising rates, while evoking the risk that (the Fed) could tighten its policy more than necessary.