WASHINGTON (Reuters) – The U.S. Federal Reserve could be forced to raise interest rates another 50 basis points this year, St. Louis branch chairman James Bullard said on Monday.
“The risk with inflation is that it doesn’t turn around and come back down to low levels,” he said in a speech to the American Gas Association.
“With such a good labor market, now is the perfect time to put this problem behind us and not relive (the situation) of the 1970s,” he added.
After the rate hike of 25 basis points, decided at the beginning of the month, the American central bank had hinted at a pause in the rise in the cost of credit. James Bullard’s statements suggest that a status quo in June would not presage a complete halt to the current monetary firming cycle.
Fed Chairman Jerome Powell said on Friday the need for the central bank to raise interest rates further was unclear, as the impact of previous hikes and tighter credit conditions remained uncertain. .
Speaking on CNBC, Minneapolis Fed Chairman Neel Kashkari said Monday that he would hesitate between raising rates and taking a break next month. He added that inflation in services remained persistent and that the fed funds rate may need to be raised above 6% to bring inflation back towards the Fed’s 2% target.
“The important thing for me is to make it clear that we are not done (with the rise in rates) (…) if we skip June,” he added.
Since March 2022, the Fed has raised rates at each of its monetary policy meetings, bringing the fed funds rate to 5.00%-5.25%.
(Report Howard Schneider and Dan Burns; Claude Chendjou, edited by Blandine Hénault)
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