Hawkish message from St. Louis Fed President

St. Louis Fed President James Bullard stated that they need to act quickly in the face of rising inflation and that they need to raise the policy rate to 3.75-4 percent by the end of the year. Ahead of Fed Chair Jerome Powell’s Jackson Hole speech, which is expected to increase volatility in the markets, some Fed members increased the hawkish tone of the bank’s messages. St. Louis Fed President James Bullard stated that they need to act quickly in the face of rising inflation and that they need to raise the policy rate to 3.75-4 percent by the end of the year. Bullard told CNBC, “I am in favor of front-loaded rate hikes. I would prefer to act early rather than late on rate hikes. We are currently at 2.33 percent (in the cost of funding). This is not enough.” Speaking to Bloomberg TV before Bullard, Kansas City Fed President Esther George also emphasized that interest rates should remain above 4 percent for a while. Philadelphia Fed President Patrick Harker also stated that interest rates should rise to levels that restrict economic activity. One of the issues that is being wondered is whether the Fed will increase interest rates by 50 or 75 basis points in September and whether Powell will give a message in this direction. Harker said that 50 basis points should not be seen as a dovish step and reminded that 75 of the 86 Fed rate hikes since 1983 were below 50 basis points. Atlanta Fed President Raphael Bostic stated that he was equally distant from both options and said, “I can flip a coin in the current situation.” The Fed will see August inflation and employment data before the September 20-21 interest rate meeting.