WASHINGTON (Reuters) – St. Louis Fed President James Bullard said Wednesday that U.S. Federal Reserve policymakers should get the policy rate of interest above 5% “as quickly as we can” before pausing rate increases needed to battle an ongoing outbreak of inflation.
Asked during a Wall Street Journal event if he was open to another half point rate increase at the Fed’s upcoming meeting, Bullard responded “why not go to where we’re supposed to go?…Why stall?”
The most recent Fed projections showed policymakers expecting to raise the target interest rate from the current range between 4.25% and 4.5% to above 5% this year, but several officials have said they want to move in quarter point increases at upcoming meetings.
Investors in fed funds futures anticipate that is what the Fed will do when the central bank holds its next two-day meeting on Jan. 31-Feb. 1.
Bullard said he felt the policy of “frontloading” rate increases with larger three-quarter-point and half-point increases had worked well, and that he saw no reason to stop until the policy rate was nearer the level seen as a likely stopping point.
In projections issued in December the median official saw that “terminal” rate at around 5.1%.
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With the risks of inflation remaining higher than expected and the economy at this point performing better than anticipated, “let’s move the policy rate to the right level…then we’ll see how 2023 unfolds.”
Bullard is not a voting member of the Federal Open Market Committee this year.
(Reporting by Howard Schneider; Editing by Chizu Nomiyama and Andrea Ricci)