First US interest rate hike could come in March, says Fed’s Bullard

The Federal Reserve (Fed, US central bank) may raise interest rates as early as March and should take even more aggressive measures against inflation, if necessary, after a monetary policy reset last month, the president of the Federal Reserve said. St. Louis Fed, James Bullard, this Thursday (6).

The U.S. central bank agreed last month to end its asset purchases in March and set the stage for the start of rate hikes, something that all monetary policymakers, even the most tolerant of inflation, now deem appropriate. in 2022.

The Fed “is in a good position to take additional steps as needed to control inflation, including allowing for passive balance sheet shrinkage, raising the benchmark rate and adjusting the timing and pace of subsequent rate hikes,” Bullard said in prepared remarks for the Fed. the CFA Society of St. Louis (an organization of finance and investment professionals).

An initial interest rate hike could be approved as early as the March meeting. “Subsequent interest rate increases during 2022 could be brought forward or postponed, depending on the evolution of inflation,” Bullard said.

Projections released in December showed that half of Fed officials expect three rate hikes of 0.25 percentage points each to be needed this year.

Inflation is above double the central bank’s 2% rate target, and Bullard said the inflation “shock” the US has suffered means the Fed should be able to meet its inflation targets for several years.

The monetary policy shift in December came at a time when the Omicron variant of the coronavirus was starting to drive up daily infection rates.

But Bullard said he didn’t think the current wave of cases would derail the US economy or the Fed.

Infections in the United States “should follow the pattern of where the variant was first identified” in South Africa, Bullard said, citing projections that the daily case count could peak later this month.