News Digest: US could see a 3.5% hike in interest rates by end-2022
April 1, 2022
A 40-year-high inflation readings in the US could prompt the Federal Reserve to continue increasing inflation rates in successive months, culminating in a cumulative 3.5% spike by the end of 2022. James Bullard, president of the St. Louis Federal Reserve President, thinks this is the only way to go inflation neutral.
The Fed, which had raised its target policy rate by 25 basis points in March, with forecasts released at the time indicated a further rise by 190 basis points by year-end. However, if Bullard has his way, the Fed would require a half-point rate hike at all six of its remaining meetings over the year.
Bullard said he would also start reducing the Fed’s balance sheet at an upcoming meeting but was averse to selling bonds unless inflation remains on an obstinate growth path.