Federal Reserve Bank President argues for Faster Rate Hikes — Says the Organization Risks Losing Credibility on Inflation Target

Bullard is an economist who has been the president of the Federal Reserve Bank of St. Louis since 2008. He reiterated that in his judgment, “a 50-basis-point upward adjustment to the policy rate would have been a better decision for this meeting.”

Noting that “Headline PCE inflation measured from one year earlier is currently 6.1%, and the associated core PCE inflation rate, which ignores food and energy components, stands at 5.2%,” the St. LouisFed president stated: “The committee is missing its target by 410 basis points on the headline measure and 320 basis points on the core measure.” He suggested:

The burden of excessive inflation is particularly drastic for people with modest incomes and wealth and for those with limited ability to adjust to a rising cost of living.

“The committee’s policy rate is currently far too low to prudently manage the U.S. macroeconomic situation … U.S. monetary policy has been unwittingly erasing further because inflation has risen sharply while the policy rate has remained very low, pushing short-term real interest rates lower,” Bullarddetailed, emphasizing:

The committee will have to move quickly to address this situation or risk losing credibility on its inflation target.

I recommended that the committee try to achieve a level of the policy rate above 3% this year. This would quickly adjust the policy rate to a more appropriate level for the current circumstances.