(Washington) A US central bank (Fed) official said on Thursday that another sharp rate hike seems necessary at the September meeting, as inflation is still very high and will take time to slow.
Posted at 3:09 p.m.
“I’m leaning at this point, towards 75 basis points”, or three-quarters of a percentage point, as in previous meetings, mid-June and end-July, said in an interview with the wall street journal the president of the regional branch of the St Louis Fed, James Bullard, known for his positions in favor of a restrictive monetary policy.
“We should continue to move quickly towards a level of key rates that will exert significant downward pressure on inflation,” said the official, who is among the voters this year on the Monetary Policy Committee (FOMC), a body responsible for Fed decision.
In other words, according to him, the Fed must continue, during its next meetings, to make strong increases in rates, until reaching the range of 3.75-4.00% by the end of the year.
“We have relatively good economic data, and very high inflation, so I think it would make sense to keep raising the policy rate and into restrictive territory,” he said.
“I don’t really see why you want to drag out interest rate hikes next year” instead of doing them in 2022, Bullard added.
He stressed that he was not certain that inflation had peaked, despite the slowdown seen in July, and predicted a process of about 18 months to bring price pressures back to the Fed’s 2% target, with a probably jagged trajectory.
“The idea that inflation has peaked is hopeful, but it’s not really, statistically, in the data at this point,” said James Bullard.
He also anticipates growth in the second half, as the economy contracted in the first six months of the year, and believes the labor market will also remain robust.
The minutes of the last Fed meeting, published on Wednesday, showed the monetary committee’s intention to continue raising rates, while mentioning the “risk that [la Fed] can tighten its policy more than necessary”.