Bullard: Would like to see Fed funds rate hit 3.5% in H2 2022

St Louis Fed President James Bullard on Thursday said that he would like to see the Federal Funds rate hit 3.5% in the second half of 2022, reported Reuters. Bullard said he would “lean into” a 50 bps rate hike at the May meeting, though he is watching the data. Most of the balance sheet decisions are already priced in, he added, noting that there is no reason for that to influence the pace of interest rate increases.

Increases in the Federal funds rate to neutral should be relatively cost-free in terms of any hit to the economy, or increase in recession risk, he said, adding that, as it stands, he does not think the Ukraine war should be a reason to avoid action in the US on inflation.

Bullard commented that sales of mortgage-backed securities are “not imminent”, with the Fed wanting to get the passive runoff started before later assessing things. The geopolitical split from the Ukraine war is likely to last, he noted, and this would realign global markets.