St. Louis Fed President James Bullard thinks markets are underpricing inflation, which may be “more persistent than what many on Wall Street expect,” he said. HeleneBraunn reports.
St. Louis Federal Reserve President James Bullard said markets aren’t properly pricing in the idea that inflation, and thus interest rates, will remain elevated well into the future.interview
with CNBC from the Fed's annual economic symposium in Jackson Hole, Wyoming. His comments suggest that current pricing showing an end to Fed rate hikes in early 2023 and possibly a rate cut by the end of that year will prove to be optimistic. Tighter monetary policy for longer than anticipated might mean renewed risk-off sentiment in markets, including crypto. Indeed, bitcoin and other crypto assets have bounced alongside stocks over the past few weeks in hopes the Fed might begin to slow or even end its aggressive string of rate hikes.
Bullard also said he prefers to “front load” hikes and that raising rates aggressively in the beginning shows the Fed is taking inflation seriously. His expectation of a year-end Fed funds rate of 3.75%-4% is about 25-50 basis points higher than short-term rate markets have priced in.
While Harker would like to see the Fed Funds rate get to about 3.5%,and then pause and re-assess, Kansas City Fed President Esther GeorgeThe main event comes on Friday morning, when Federal Reserve Chairman Jerome Powell will make his keynote address. Given the hawkish tilt to the Fed chatter ahead of his talk, it seems more likely than not that Powell will take the opportunity Friday to reiterate his intention to bring the inflation rate sharply lower.
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