St. Louis Fed President James Bullard on Monday said he would like to see two more quarter-percentage-point interest-rate hikes this year.
“I think we’re going to have to grind higher with the policy rate in order to put downward pressure on inflation,” Bullard said in a moderated discussion at the American Gas Association’s Financial Forum in Fort Lauderdale, Fla.
Bullard said that the timing of the rate hikes was uncertain but that he has been an advocate of raising rates “sooner rather than later.”
“You want to get the downward pressure while you can,” he said.
The Fed raised its benchmark rate by 25 basis points to a range of 5%-5.25% at its meeting in May. That matches the median forecast of Fed officials for the peak interest rate in this cycle.
Officials at the Fed are divided over whether to continue to hike rates at their meeting in mid-June or pausing to see how the economy is affected by lags from the rapid pace of hikes. Some officials don’t like the word “pause” and have described holding rates steady in June as a “skip,” because it underlines that they are not saying they are done raising rates.
The markets think the Fed is done with rate hikes and have even been pricing in rate cuts later this year.
Bullard said that the Fed’s forecast of no more hikes was based on its expectations of slower growth and a faster drop in inflation in the first half of the year than has been seen in subsequent data.
“Inflation is hanging up too high,” Bullard said.
Stocks
DJIA,
SPX,
were set to open slightly higher on Monday, while the yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.7%.
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