Looks like Bullard will not be alone in May. Federal Reserve Bank of San Francisco President Mary Daly said she has “everything on the table” for the next policy meeting in May…(Bloomberg)
- “If we need to do 50, that is what we’ll do,” Daly said also noting she could support a 25 basis-point hike. “We’re prepared to do whatever it takes to ensure that we get price stability, which clearly no one thinks we have right now.”
REMINDER: James Bullard, President of the Federal Reserve Bank of St. Louis, told Bloomberg on Tuesday “We came out of the pandemic and we got surprised by inflation…But now what you have to do is move the policy rate up discreetly a fair amount — not to be too disruptive, but I think 50 basis points should definitely be in the mix.”
UPDATE: Federal Reserve Bank of Cleveland President Loretta Mester said Wednesday that the U.S. central bank will need to front load its rate rise campaign with aggressive moves…(Wall Street Journal)
- “I think we’re going to need to do some 50-basis-points moves,” Ms. Mester said in reference to the possibility the central bank will raise rates by half percentage point increments, rather than in more-common quarter percentage point increases.
The good news is Ms. Mester is confident these hikes will not cause a recession and will allow a soft landing “I don’t have concerns that the rate increases are going to push the economy into recession, just because the underlying momentum is so strong, and there’s excess demand in the economy right now…I am optimistic that we can do what we’re intending to do, which is get inflation under control” with higher rates and taking steps to lower the size of the Fed’s currently $9 trillion balance sheet.”
However, based on their current predictive record maybe I shouldn’t be celebrating just yet…
