Former Federal Reserve Bank of St. Louis President James Bullard said the central bank may need to raise interest rates further and hold them higher to guard against the risk of a reacceleration of inflation.
(Bloomberg) — Former Federal Reserve Bank of St. Louis President James Bullard said the central bank may need to raise interest rates further and hold them higher to guard against the risk of a reacceleration of inflation.
“I think that may be a good thing to do as insurance to make sure that core inflation especially continues to come down at an appropriate pace so the committee can get back to 2% inflation in a reasonable time frame,” Bullard, now the dean of Purdue University’s business school, said Thursday during an interview with Bloomberg TV’s Michael McKee.
The Fed held rates steady on Wednesday at a 22-year high, and most policymakers signaled they would favor one more rate increase this year. In new economic projections released after their two-day policy meeting, officials also trimmed estimates for rate cuts next year, a sign they expect rates to stay higher for longer to contain inflation.
Chair Jerome Powell said at a press conference that officials are “prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our objective.”
Bullard said “it makes a lot of sense” that policymakers emphasized rates will need to stay higher for longer, given the strength of the economy and sturdy labor market.
“The prospects for a soft landing are very good, but you haven’t landed until you get inflation back to 2%,” he said.
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