Fed’s Bullard: Rates aren’t high enough now

Federal Reserve’s president and CEO of the Federal Reserve Bank of St. Louis James Bullard: in a CNBC interview has said rates aren’t high enough now.

Meanwhile, Fed funds futures traders are pricing in a 59% chance that the Fed will hike rates by another 75 basis points at its September meeting, and a 41% probability of a 50 basis points increase.

The US dollar slipped on Thursday in choppy trading as investors waited on a speech by Federal Reserve Chairman Jerome Powell on Friday for further clues about the ongoing pace of the US central bank’s rate hikes.

Key Quotes:

3.75% – 4% is my target for this year.
Says he likes the idea of front loading; it ‘shows you are serious about inflation fight’.
Rates aren’t high enough now.
Labour market is strong right now.
Front loading shows you are serious about the inflation fight.
Rates aren’t high enough now.
Need to get the policy rate to where it pushes downward pressure on inflation.
After rates get above 3.75%-4%, not quite sure what’s next.
My baseline is that inflation will be more persistent than many expect.
Inflation will be higher for longer.
That risk is underpriced in the market.
Markets are showing outstanding confidence in the Fed, hope they are right.
The risk is that we may have to be higher for longer.
Asked about the stock market, says he tries to stay away from equity pricing.
I don’t want to take too much signal from the stock market.
Bond markets give a little better pricing of the risk we will have to do more.
You should be able to hit the inflation target even if there are factors out of Fed’s control.
Recessions are not that predictable.
We are of course taking recession risk, but we don’t know one way or the other.
GDP was positive for the 2Q, consistent with what businesses say about hard-to-hire
After the pandemic, we set out a path on asset-buying that was ‘overboard’.
Now we have to switch back; the Fed has to get inflation back to 2%.