Federal Reserve Bank of St. Louis President James Bullard called for more aggressive measures to fight inflation and reduce the size of the Fed’s balance sheet. “The burden of excessive inflation is particularly heavy for people with modest incomes and wealth and for those with limited ability to adjust to the rising cost of living,” he said.
Fed’s Bullard pushes for more aggressive rate hikes to better manage economic situation
St. Louis Federal Reserve Chairman James Bullard released a statement on Friday regarding his dissenting vote at last week’s Federal Open Market Committee (FOMC) meeting.
At the meeting, the FOMC decided to “raise the target range for the federal funds rate by 25 basis points to 0.25% – 0.50%,” Bullard explained, adding:
In my view, raising the target range to 0.50% – 0.75% and implementing a plan to reduce the size of the Fed’s balance sheet would have been more appropriate actions.
Bullard is an economist who has been chairman of the Federal Reserve Bank of St. Louis since 2008. He reiterated that in his view, “a 50 basis point upward adjustment in the policy rate would have been a better move for this meeting. “. .”
He explained that the FOMC “has a mandate to provide stable prices for the US economy and a 2% inflation target expressed in terms of PCE (Personal Consumption Expenditures Price Index) inflation.”
Noting that “headline PCE inflation measured a year earlier is currently 6.1%, and the associated core PCE inflation rate, which ignores food and energy components, stands at 5.2% “The St. Louis Fed Chairman said: “The committee misses its target by 410 basis points on the aggregate measure and by 320 basis points on the core measure. It issued the following advice:
The burden of excessive inflation is particularly heavy for people with modest incomes and wealth and for those with limited ability to adjust to the rising cost of living.
“The committee’s policy rate is currently far too low to prudently manage the US macroeconomic situation…US monetary policy has unintentionally eased further because inflation has risen sharply while the policy rate has remained very low, pushing falling real short-term interest rates”. Bullard detailed, noting:
The committee will have to act quickly to remedy this situation or risk losing its credibility on its inflation target.
I recommended to the committee to try to achieve a policy rate level above 3% this year. This would make it possible to quickly adjust the key rate to a level more appropriate to current circumstances.
Ten FOMC members forecast a federal funds rate of 1.75% to 2% by the end of the year, according to projections they submitted at last week’s meeting. However, eight said it should be higher, with the highest prediction indicating a range of 3% to 3.25%.
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