Fed's Bullard: US interest rates have to rise further to ensure that inflationary pressures recede

St. Louis Federal Reserve's President James Bullard said US interest rates have to rise further to ensure that inflationary pressures recede.

''We’re almost into a zone that we could call restrictive - we’re not quite there yet,” Bullard said Wednesday in an online Wall Street Journal interview. Officials want to ensure inflation will come down on a steady path to the 2% target. “We don’t want to waver on that,” he said.

“Policy has to stay on the tighter side during 2023” as the disinflationary process unfolds, Bullard added.

Bullard has pencilled in a forecast for a rate range of 5.25% to 5.5% by the end of this year.

US Dollar update

It has been a volatile spell in the forex space with the US Dollar whipsawed on the day after a slew of weak data suggested the world's largest economy is finally slowing down. Wednesday's economic reports, Producer Price Index and Retail Sales which showed disinflationary tendencies in the data,  reinforced expectations that the Fed will continue to reduce its tightening pace in upcoming meetings.

The data followed a turbulent Bank of Japan event. At a two-day policy meeting, the BOJ kept intact its YCC targets and made no change to its guidance that allows the 10-year bond yield to move 50 basis points on either side of its 0% target. The yen was broadly weaker, supporting the US Dollar momentarily before the Yen walked back some of its losses amid speculation that the BOJ was likely to tighten policy soon.

DXY index:

We are getting a burst of life from the bulls in recent trade as follows:

The hourly W-formation is a reversion pattern and the resistance could prove to be a tough nut to crack for the rest of the day.