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Fed bullard says “confidence in central bank is at stake”, he should “warn” rate hikes

St. Louis Federal Reserve Chairman James Bullard called for a rapid rise in interest rates, saying on Monday that the central bank should respond to accelerating inflation.

“I believe we need to carry out more planned housing withdrawals than we would have done before. We were surprised that inflation rose. This is high inflation, ”Bullard told CNBC’s Steve Lisman during the live broadcast. “Squawk Box“interview.

“Our credibility here is at stake and we need to respond to the data,” he added. “However, I think we can do it in an organized way and not hinder the market.”

The comments came after Bullard shook the markets last week, saying he believes the Fed should raise the base rate on short-term loans by a full interest rate by July. In an interview with Bloomberg News, this position led to volatile stock growth and caused prices in futures markets by the end of 2022 by seven quarters of a percent.

Along with that, markets are now leaning towards 50 basis points, or 0.5 percent, growth at the March meeting.

“I think my position is good and I will try to convince my colleagues that it is good,” Bullard told CNBC.

On Monday morning, stock market futures were slightly lower, rising from the previous level on some encouraging news of hostilities between Russia and Ukraine.

While virtually all officials on the Federal Open Market Committee have expressed a desire to start raising rates in March, Bullard was perhaps the most hawkish. Several other officials said they think a quarter-point step at the upcoming meeting will be enough.

“History tells us with Fed policy that drastic and aggressive actions can actually have a destabilizing effect on the growth and stability of the prices we are trying to achieve,” said San Francisco Fed President M.Eri Daly said on Sunday on CBC’s “Face the Nation”. “So I’d like to move on to March and then observe, measure, be very careful about what we see ahead, and then take the next interest rate hike if it seems like the best place to do it.”

But Bullard has insisted that inflation has been hot for months, and the Fed must be strong in using its tools to control rising prices.

Showed the consumer price index for January growth for 12 months by 7.5%even more than Wall Street suggests, and continuing a scheme that began in the back half of 2021.

“My interpretation was not so much in this report, but the last four reports, taken in tandem, show that inflation in the US economy is expanding and possibly accelerating,” Bullard said.

Even with strong inflation, real incomes are mostly declining as inflation outpaces average hourly wages.

“The inflation we are seeing is very bad for low- and middle-income households,” he said. “People are unhappy, consumer confidence is declining. This is not a very good situation. We need to assure people that we will protect our inflation target and get back to 2%.”

Later this week, markets will review the Fed’s views when the FOMC publishes the minutes of the January meeting. One area of ​​interest will be how the central bank will begin to cut nearly $ 9 trillion in assets that doubled during the pandemic when the Fed bought up trillions of Treasury bonds and mortgage-backed securities.

Despite the surge in inflation, the Fed intends to buy $ 20 billion more in Treasury bonds over the next month along with nearly $ 28 billion in MBS before completing the program in March.

Bullard said he would like to see a bond cut that begin in the second quarter with “some plan B in our pocket” when the Fed can actually sell assets rather than allow passive withdrawals from proceeds.

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Fed bullard says “confidence in central bank is at stake”, he should “warn” rate hikes

St. Louis Federal Reserve Chairman James Bullard called for a rapid rise in interest rates, saying on Monday that the central bank should respond to accelerating inflation.

“I believe we need to carry out more planned housing withdrawals than we would have done before. We were surprised that inflation rose. This is high inflation, ”Bullard told CNBC’s Steve Lisman during the live broadcast. “Squawk Box“interview.

“Our credibility here is at stake and we need to respond to the data,” he added. “However, I think we can do it in an organized way and not hinder the market.”

The comments came after Bullard shook the markets last week, saying he believes the Fed should raise the base rate on short-term loans by a full interest rate by July. In an interview with Bloomberg News, this position led to volatile stock growth and caused prices in futures markets by the end of 2022 by seven quarters of a percent.

Along with that, markets are now leaning towards 50 basis points, or 0.5 percent, growth at the March meeting.

“I think my position is good and I will try to convince my colleagues that it is good,” Bullard told CNBC.

On Monday morning, stock market futures were slightly lower, rising from the previous level on some encouraging news of hostilities between Russia and Ukraine.

While virtually all officials on the Federal Open Market Committee have expressed a desire to start raising rates in March, Bullard was perhaps the most hawkish. Several other officials said they think a quarter-point step at the upcoming meeting will be enough.

“History tells us with Fed policy that drastic and aggressive actions can actually have a destabilizing effect on the growth and stability of the prices we are trying to achieve,” said San Francisco Fed President M.Eri Daly said on Sunday on CBC’s “Face the Nation”. “So I’d like to move on to March and then observe, measure, be very careful about what we see ahead, and then take the next interest rate hike if it seems like the best place to do it.”

But Bullard has insisted that inflation has been hot for months, and the Fed must be strong in using its tools to control rising prices.

Showed the consumer price index for January growth for 12 months by 7.5%even more than Wall Street suggests, and continuing a scheme that began in the back half of 2021.

“My interpretation was not so much in this report, but the last four reports, taken in tandem, show that inflation in the US economy is expanding and possibly accelerating,” Bullard said.

Even with strong inflation, real incomes are mostly declining as inflation outpaces average hourly wages.

“The inflation we are seeing is very bad for low- and middle-income households,” he said. “People are unhappy, consumer confidence is declining. This is not a very good situation. We need to assure people that we will protect our inflation target and get back to 2%.”

Later this week, markets will review the Fed’s views when the FOMC publishes the minutes of the January meeting. One area of ​​interest will be how the central bank will begin to cut nearly $ 9 trillion in assets that doubled during the pandemic when the Fed bought up trillions of Treasury bonds and mortgage-backed securities.

Despite the surge in inflation, the Fed intends to buy $ 20 billion more in Treasury bonds over the next month along with nearly $ 28 billion in MBS before completing the program in March.

Bullard said he would like to see a bond cut that begin in the second quarter with “some plan B in our pocket” when the Fed can actually sell assets rather than allow passive withdrawals from proceeds.

Reported by Source link

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