St. Fed Lewis Bullard says the central bank should raise interest rates above 3% this year

St. Lewis Fed President James Bullard said Friday that he believes the central bank should raise interest rates by 12 times this year to convince the public that it is serious about fighting inflation.

As the only defector at this week’s Fed meeting, Bullard said in a statement that he would like to see the central bank’s benchmark interest rate rise above 3% from the near 0% level where it has been in place.

“This will quickly adjust the price of the policy to a level that is more appropriate for the current conditions,” he said.

Following its two-day meeting, the Federal Open Market Committee held on Wednesday It said it would raise banks’ overnight interest rates by 0.25 percentage pointsHistorically, the typical increase that the Federal Open Market Committee moves with. An accompanying economic forecast indicated a trajectory this year would see the equivalent of seven price increases, or 1.75 percentage points.

The move was the first time the Federal Reserve had raised interest rates since December 2018 and came in response to an astonishing rise in inflation that sent prices up in Fastest pace in 40 years.

Pollard was the only FOMC member to vote against the move, indicating that he would have preferred a 0.5 percentage point, or 50 basis point, rate hike. He added that the Fed should also have begun the process of reducing the nearly $9 trillion in bonds it has accumulated over the past 14 years.

at Friday’s statementhe said, that inflation hurts the people the Fed is trying to help the most, namely those at the lower rungs of the economic ladder.

“The burden of hyperinflation is particularly heavy on those with modest incomes and wealth and those with limited ability to adapt to the rising cost of living,” he said. “The combination of strong real economic performance and unexpectedly high inflation means that the committee’s policy rate is currently too low to manage the US macroeconomic situation wisely.”

Federal Reserve officials are generally divided on how to proceed with interest rates this year.

ten members Not specified in the federal funds rate from 1.75%-2% by the end of the year, but eight said it should be higher. The highest “point” in the commission’s point chart, which is assumed to be the Pollard’s point, indicated a range of 3%-3.25%.

He noted that the Fed had moved aggressively before, in 1994-1995, to combat an accelerating economy and a gradual rise in inflation.

“The results have been excellent,” Pollard said. “The Committee had an average inflation rate of 2% and the US economy boomed during the second half of the 1990s. I think the Committee should try to achieve a similar result in the current environment.”

On the Fed’s balance sheet issue, Pollard did not provide details of what he believed the central bank should do, saying only that the “plan” at this week’s meeting was appropriate.

The statement that followed the meeting indicated that the committee “expects to start, in an upcoming meeting, reducing its holdings of treasury bonds, agency debt and mortgage-backed securities of the agency.” Fed Chairman Jerome Powell said then that the process could be as soon as May.