- St. Louis Fed President James Bullard expects two additional rate hikes by year-end.
- “I think we’re going to have to grind higher with the policy rate in order to put downward pressure on inflation.”
- The US central bank has delivered 10 consecutive rate increases since March 2022.
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St. Louis Fed President James Bullard expects the US central bank to deliver two more interest rate hikes to tamp down inflation in 2023.
“I think we’re going to have to grind higher with the policy rate in order to put downward pressure on inflation,” he said at an event in Fort Lauderdale, Florida, on Monday. “I’m thinking two more moves this year – exactly where those would be this year I don’t know – but I’ve often advocated sooner rather than later.”
Consumer inflation has slowed considerably, with prices up 4.9% annually in April versus last June’s high of 9%. But that is still well above the Fed’s 2% inflation target.
Meanwhile, the economy has remained more robust than expected, with unemployment still at the lowest levels since the 1960s, he said.
“You want to get the downward pressure while you can,” said Bullard, who is a non-voter in rate-setting meetings this year.
The central bank drove up its benchmark rate by another 25 basis points to a target range of 5%-5.25% at its policy meeting earlier this month. The Fed has already delivered 10 consecutive rate increases in an effort to combat inflation since March 2022.
Policymakers will kick off another two-day meeting on June 13 to deliberate on the Fed’s next move.
Bullard also said that although “recession probabilities are overstated,” the economy will have “relatively slow growth for the rest of this year and through 2024.”
He added: “There’s always some risk of a recession so maybe that will happen, but I don’t think it’s as high a probability as where Wall Street is today.”