Louis Federal Reserve Bank President James Bullard declared on Monday that he would like to see two more 25 basis point Fed rate hikes this year to curb stubbornly high inflation. “You have a pretty solid growth of the US economy in 2023, and you have inflation that hasn’t come down fast enough,” he said at an American Gas Association event. “For this reason, I think we will have to raise the discount rate.”
Bullard is one of the most hawkish members of the Fed, who was the first to advocate aggressive rate hikes before the central bank started to raise the cost of borrowing last year. He has no voting rights on the Fed’s Open Market Committee in 2023.
The Fed has been raising rates vigorously since the beginning of last year, raising its base rate to the 5%-5.25% range from near zero. It has slowed the pace this year, posting three consecutive quarter-percentage raises after raising them faster through most of 2022. Some officials expressed support for a pause on any increase at the upcoming June meeting.
However, Bullard believes the committee needs to move rates higher, and the current low unemployment situation is a good time to act. “While the labor market is so good, this is a great time to fight inflation, get it back on track,” he said. “Solve this problem and not repeat the 1970s.”
His opinion is contrary to market expectations, which indicate a low probability of a rate hike before the end of the year. By data CME Group’s Fedwatch tool, there is a 68.6% chance of a pause in June, and a mere 31% chance of one 25 basis point advance before December.