Fed's Bullard: Better to start hikes “sooner rather than later”, QT should begin “shortly after”
06.01.2022, 20:04

Fed's Bullard: Better to start hikes “sooner rather than later”, QT should begin “shortly after”

St Louis Fed President and FOMC voting member in 2022 James Bullard said on Thursday that he was among those who projected that the Fed would hike interest rates three time in 2022. Moreover, he added, it is better to get started with rates hikes "sooner rather than later" and the pace of rate hikes can be moderated later if inflation slows. The balance sheet run-off (or quantitative tightening or QT) should begin "shortly after" the initial interest rate rise, he added. 

Further remarks:

"It's uncertain how much inflation control will depend on "natural moderation" versus Fed intervention."

"Expect inflation to moderate naturally to some degree, but "not dramatically" and still above 3% at end of the year."

"Balance sheet could decline even below pre-pandemic levels given existence now of standing repo facility."

"Good reasons for labor force participation to be lower today than before the pandemic."

"Fed "very surprised" by the level of inflation, "incumbent" on the central bank to act to maintain its credibility."

"Pre-pandemic employment level not a good benchmark of current "very tight" labor market."

"A smaller balance sheet and higher policy rate means that both ends of the yield curve should rise in tandem."

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