The US Federal Reserve calls for a drastic hike in interest rates
A senior Federal Reserve official is now going on the offensive. Inflation must be brought under control. By the end of the year, he intends to raise interest rates in the United States much more than all forecasts had predicted.
DUS Federal Reserve banker James Bullard has called for a drastic increase in US interest rates to 3.5% by the end of the year to curb high inflation. “Inflation is way too high,” the chairman of the St. Louis branch of the US Federal Reserve said Monday evening during a virtual conference. “We need to get inflation under control.”
The Fed raised interest rates by 0.25 percentage points to 0.5% last month, and Fed projections at the time called for a year-end rate of around 1.9% . The market is currently assuming a level of 2.5-2.75%.
Bullard’s target would therefore be considerably more aggressive. However, the increase to 3.5% should not come in one step, Bullard said, and increases should not exceed 0.5 percentage points per step.
The inflation rate will fall partly on its own, he said. But this does not apply to the whole wave of inflation. In March, inflation in the United States reached 8.5%, its highest level since 1981. At least 3.6 percentage points would not come down on their own. “And that’s well above our 2% target,” Bullard said. So the Fed needs to act
He added that the US economy will not go into recession and that the unemployment rate, currently at 3.6%, is expected to fall below 3% this year. The war in Ukraine will likely have a significant impact on economic development in Europe, but the effects on North America will remain limited.
“All About Stocks” is the daily stock market cliche from WELT’s business editorial staff. Every morning from 7am with our financial journalists. For stock market experts and beginners. Subscribe to the podcast at Spotify, Apple podcast, Amazon Music and deezer. Or directly by RSS feed.