PARIS (Reuters) – U.S. Federal Reserve (Fed) officials must raise interest rates above 5% “as quickly as possible” before a possible pause, the chairman of the St. Louis, James Bullard.
Asked if he favored a half-point rate hike at the Fed’s February monetary policy meeting, James Bullard said: “Why not go where we’re supposed to go? .. Why hang around?
The St. Louis Fed President was speaking at an event hosted by The Wall Street Journal.
The latest Fed projections suggest that US interest rates, currently in the range of 4.25% to 4.50%, could rise to over 5% this year. Several US central bank officials, however, have said they want a rate hike limited to a quarter point at future Fed meetings.
This is also the hope of many investors, with regard to futures contracts on “fed funds”.
According to James Bullard, the policy of “looking forward” on rate hikes with significant hikes of three quarters and half a point has worked well so far. He added that he saw no reason to stop it until the key rate was closer to the level considered to be its probable peak.
In the projections published in December, the midpoint of the “terminal” rate is around 5.1%.
Since inflation risks remain higher than expected and the economy at this stage is performing better than expected, “let’s get the policy rate to the right level (…) then we’ll see how 2023 goes,” said James Bullard.
The St. Louis Fed Chairman is not a voting member of the US central bank’s Federal Open Market Committee (FOMC) this year.
The US stock indices, which had benefited at the opening of Wall Street from the publication of two economic indicators showing a drop in inflationary pressures and a slowdown in demand, turned around, losing 0.3% to 0.8% after statements by James Bullard.
(Report Howard Schneider; French version Claude Chendjou, edited by Blandine Hénault)
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