Federal Reserve Bank of St. Louis Governor James Bullard is calling for more aggressive steps to combat inflation and reduce the size of the Federal Reserve’s balance sheet. And for those who have limited ability to adapt to rising living costs, “he emphasized.
The Federal Reserve promotes more aggressive rate hikes to better manage economic conditions
Federal Reserve Bank of St. Louis Governor James Bullard issued a statement on Friday that voted against the Federal Open Market Committee (FOMC) meeting last week.
At the meeting, the FOMC decided to “raise the federal funds rate target range by 25 basis points to 0.25% – 0.50%.”
In my view, it was more appropriate action to implement a plan to raise the target range from 0.50% to 0.75% and reduce the size of the Fed’s balance sheet.
Mr. Bullard is an economist who has been President of the Federal Reserve Bank of St. Louis since 2008. In his judgment, “at this meeting, it would have been a better decision to raise the policy rate by 50 basis points.”
He explained that the FOMC “is obliged to provide a stable price to the US economy and has an inflation target of 2% for PCE (Personal Consumer Expenditure Price Index) inflation under the heading.”
“The headline PCE inflation rate, measured from a year ago, is now 6.1%, and the associated core PCE inflation rate, ignoring food and energy components, is 5.2%,” said the President of the Federal Reserve Bank of St. Louis. It states as follows. The goal is 410 basis points for the headline metric and 320 basis points for the core metric. “He said.
The burden of excessive inflation is especially heavy for those with moderate income and wealth, and those with limited ability to adapt to rising living costs.
“The Commission’s policy rate is currently too low to carefully manage the U.S. macroeconomic situation … the U.S. as policy rates remain very low while inflation surges and pushes short-term real interest rates down. Monetary policy has been unknowingly further relaxed, “Bullard elaborated on, emphasizing:
The Commission needs to act swiftly to deal with this situation. Otherwise, you run the risk of losing confidence in your inflation target.
Bullard further said:
I recommended that the Commission try to reach the policy rate level above 3% this year. This will allow the policy rate to be quickly adjusted to the appropriate level for the current situation.
According to forecasts submitted in connection with last week’s meeting, 10 FOMC members predicted federal funds rates of 1.75% to 2% by the end of the year. 3% to 3.25%.
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