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Inflation out of control: Bullard (Fed) calls for a 1% rate hike by July

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Inflation is now a very serious problem for the Fed. James Bullard, president of the St. Louis Fed, has returned to invoke a decided rate hike by the Federal Reserve, reiterating that without central bank action on interest rates, l‘inflation, which now travels around 7.5%risks getting out of control.

Inflation, the Fed needs to act soon

To try to keep US inflation under control according to the US central bank hawk, the Fed is expected to raise rates by 100 basis points by July. On the occasion of an event organized by Columbia University he explained “that there has never been such a high risk in a generation that the situation could get out of control “. For Bullard, a member with the right to vote on the monetary policies of the US central bank, the tightening would be a “normalization”, “manageable in many ways”. “I don’t think the rate hike will cause a recession,” he added.

These statements are added to those released a few days ago, in an interview with CNBC. “At stake is the reputation of the Federal Reserve,” Bullard said on that occasion, explaining to Cnbc because it is necessary to act as soon as possible, in a decisive way, to combat inflation, “much higher than expected”.

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Fed officials resisted the idea of ​​a tightening of policy, arguing for much of last year that the rise in prices was linked to specific factors of the pandemic, such as clogged supply chains and disproportionate demand for goods over services. , and that it would fade over time. “We risk that inflation will not dissipate and 2022 will be the second consecutive year of rather high inflation. That is why, given this situation, the Fed should move faster and more aggressively than we would have done in other circumstances, ”explained Bullard.

Interest rates: first hike in March

The Fed has indicated that it will begin raising fed funds rates for the first time since 2018 at its next meeting in March. After that squeeze, markets price five or six more 25 basis points monetary squeeze.
For the month of Marchthe expectations of a first rate hike by 50 basis points have eased however, and traders are now aiming for a 25 basis point hike, according to CME data. The likelihood of seven hikes dropped to 43% Thursday after approaching 70% earlier in the week.

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