While most market watchers know this week’s interest rate hike by the Federal Reserve was the first of many, the rate of those increases could come faster than expected.
Two Fed officials are making a public case for half-point rate hikes, perhaps multiple ones, to get inflation under control in the U.S.
St. Louis Fed President James Bullard released a statement Friday, saying he pushed for a half-point increase at this week’s meeting. Bullard, who was the only dissenter at the meeting, said he believes the benchmark index rate should top 3% by the end of the year (versus the 2% currently expected).
“The combination of strong real economic performance and unexpectedly high inflation means that the Committee’s policy rate is currently far too low to prudently manage the U.S. macroeconomic situation,” he said. “The Committee will have to move quickly to address this situation or risk losing credibility on its inflation target.”
Hours later, Federal Reserve Governor Christopher Waller appeared on CNBC and said he believed the Fed might need to enact increases of 50 basis points “at one or multiple meetings in the near future,” noting that “inflation is raging” in the U.S.
Waller voted for the quarter-point increase, but had been lobbying for a half-point bump prior to the meeting. World events changed his thinking, he said.
“The data’s basically screaming at us to go 50, but the geopolitical events were telling you to go forward with caution,” he said. “So those two factors combined pushed me off of advocating for a 50-basis-point hike and supporting the 25-point hike that we enacted.”
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