Olivia Michael | CNBC
NEW YORK – St. Louis Federal Reserve President James Bullard warned Thursday that without action from the central bank on interest rates, inflation could become a more serious problem.
“We are now in greater danger than we have been in a single generation that this could spiral out of control,” he said during a panel discussion at Columbia University. “One scenario… a new surprise that shocks us and we can’t anticipate at the moment, but we will have more inflation. This is the kind of situation we want to… make sure it doesn’t happen.”
Pollard made news lately Calling for tough action by the Federal Reserve. He has called for a full percentage point in price increases by July in an effort to stem price hikes that are at their fastest pace in 40 years.
In his comments on Thursday, Bullard reiterated the need for the Federal Reserve to raise interest rates as a way to advance The inflation rate was 7.5%. over the past year.
Federal Reserve officials have been resisting tightening, insisting for much of the past year that the current rise in prices is linked to pandemic-specific factors, such as blockages in supply chains and huge demand for goods for services, and will fade over time.
“Overall, I would say there is a lot of focus and a lot of mental engagement devoted to the idea that inflation is going to dissipate at some point in the future,” Pollard said. “We are in danger that inflation will not dissipate, and 2022 will be the second year in a row that inflation has been very high. That is why in this situation, the Fed has to move faster and more aggressively than we might have in other circumstances.”
The Fed has indicated that it will likely do so Starting to raise interest rates in March, which would be the first increase in more than three years. After that, the markets are looking for five or six additional increases of 25 basis points. The base point is equal to 0.01%.
Pollard said the upcoming change in policy should not be seen as an attempt to constrain markets and the economy.
“It’s not a strict policy,” he said. “Don’t let anyone tell you it’s a strict policy.” “It is the removal of accommodations that will signal that we take our responsibility very seriously.”
Market prices have regressed to price hikes over the past day or two, especially after Wednesday’s release January meeting minutes Officials from the Federal Open Market Committee showed they are looking to take a measured approach toward removing political assistance.
Traders are now pointing to a 25 basis point rise in March after previously eyeing a 50 basis point move, According to CME data. the The probability of seven heights On Thursday, it fell to 43% after getting close to 70% earlier in the week.
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