Bullard’s 300 basis point increase expectation

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St. Louis Fed President James Bullard stated that the policy rate should be around 3.5 percent in order to fight inflation.

In his speech at the University of Missouri event, Bullard said that the current Fed policy is as low as about 300 basis points and that the Fed is behind the yield curve.

The US Federal Reserve had increased the policy rate by 25 basis points at its March meeting, and Bullard voted to increase it by 50 basis points.

The minutes of the March 15-16 meeting yesterday showed that many Fed members also favored a 50 basis point increase, but supported the smaller montane increase due to the Ukraine risk. It was also seen in the minutes that many officials expressed the opinion that one or more 50 basis point increases were warranted.

Bullard shared his prediction that the growth will slow down, but despite the weak growth in the first quarter and Russia’s occupation of Ukraine, it will complete 2022 around 2.8 percent and the unemployment rate may decrease to 3 percent this year.

Bullard pointed out that the tightening was priced in the markets and the 2-year Treasury yield was at 2.45 percent, 1 percentage point below the level that might have been. It also indicates that it is not lagging behind the curve.”

Bullard also stated that the market-based recession signal, which takes into account the yield curve, should be taken seriously.

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