Bullard, President of the US Federal Reserve, "Interest rates should be raised by 1% point before July"

[Asia Economy New York=Special Correspondent Joselgina] James Bullard, President of the Federal Reserve Bank of St. Louis, stated that an aggressive big shot raising the benchmark interest rate by 1.0 percentage point by July 1 is necessary.

President Bullard appeared on Bloomberg News on the morning of the 10th (local time), right after the release of the U.S. January Consumer Price Index (CPI), saying, "In the past, after such a report came out, the Fed would have held a meeting and immediately raised interest rates."

Having made hawkish remarks so far, President Bullard said, "I want to look ahead to a 1 percentage point increase by July 1," emphasizing, "I have already been hawkish, but I will raise my views on the path the committee should take more dramatically." He added, "Since inflation has risen to the highest level in the past 40 years, we need to be more agile and responsive to this data."

To raise the rate by 1.0 percentage point over the next three regular Federal Open Market Committee (FOMC) meetings remaining until July 1, a 0.5 percentage point increase must be implemented at once, rather than 0.25 percentage point increments. It would be the first time since the 2000s that the Fed raises rates by 0.5 percentage points at once.

However, President Bullard mentioned that he has not yet decided whether to advocate for a 0.5 percentage point increase at the March FOMC. He drew a line, saying that such a 0.5 percentage point hike is not a strategy to cause shock or fear. He further evaluated it as "a reasonable response to the inflation shock in 2021 that we did not anticipate."

The January CPI released that day surged 7.5% year-on-year, marking the largest increase since February 1982. The rise exceeded market expectations as well as the previous month’s increase (7.0%). The core CPI, which excludes volatile energy and food prices, also soared 6.0% year-on-year.

Accordingly, market expectations are spreading that the Fed’s tightening moves, including future rate hikes, will accelerate. According to the CME Group’s FedWatch, which estimates the probability of Fed policy changes based on federal funds rate (FFR) futures prices, the probability of a 0.5 percentage point rate hike by the Fed in March jumped from 25% to 44.3% after the CPI announcement. The probability of six rate hikes this year also rose from 53% to 63%.