The Fed: Bullard Fed’s says rapid rise in interest rates now is the best way to avoid recession later

by | Jun 24, 2022 | Stock Market

The president of the St. Louis Federal Reserve on Friday said the U.S. stands a better chance of avoiding a recession if the central bank jacks up interest rates faster than usual to try to tame the worst outbreak of inflation in 40 years. At a UBS conference in Switzerland, James Bullard said an aggressive response is the best way to ” nip inflation in the bud before it gets entrenched in the economy.” The quicker inflation starts to moderate, he said, the less the Fed will need to raise rates later on.

“If all goes well, inflation starts coming down to our [2%] target, you won’t need the policy rate to be so so high,” Bullard said. The Fed last week raised its benchmark short-term interest rate to a range of 1.5% to 1.75% and signaled it could go to as high as 3.4% by year end. Higher rates raise the cost of borrowing for credit cards, mortgages, new cars and other consumer and business loans. Bullard has been the most outspoken Fed official in favor of higher rates. He warned last year that the central bank was misjudging inflation, but it’s onl …

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