Hawkish Bullard Says Harden Up on Inflation Doubles Down on 100 bps by July 1

Fed Governor speaking on CNBC doubled down his hawkish down Monday morning about raising rates bigger and sooner to try and get ahead of inflation. This isn’t a new stance, recall back in November he said, US Core PCE Is “Quite High” and added that the Fed should take towards a more hawkish policy in the next couple of meetings. He said 3%-4% Rate `Is Not My Base Case’

Fed Governor Bullard

Feds Bullard CNBC Highlights

  • Says he will try to convince is colleagues about his position
  • I think we need to front-load the removal of accommodation
  • Says he is taking last four inflation reports as a whole
  • Inflation is higher than any time it was during the Greenspan era
  • Notes that he will defer to Powell
  • Doubles down on the idea of 100 bps by July 1
  • The Fed needs to follow through and ratify market expectations
  • Typical comment from his contacts is that supply chain disruptions will last all the way through 2022 and into 2023
  • We’re going to need the runoff to start very soon
  • We have a long way to go to be restrictive
  • We could end up in a pickle if we don’t do something in the next couple months
  • Would like to see balance sheet steepen the yield curve
  • I would like a Plan B as using asset sales, if necessary
  • How selling bonds would work is an open question and that could put more upward pressure on the longer end
  • I would be happy at this point to start with a passive runoff
  • Everyone I talk to is scrambling for workers and I expect to see that reflected in wages

Feds Bullard November Speech Highlights

  • Core PCE is quite high
  • Fed should take towards a more hawkish policy in the next couple of meetings
  • Markets are past the taper tantrum.
  • The Fed could move further faster
  • Fed taper increased to $30 billion per month would open the door to rate increase end of Q1 2022
  • Tacking hawkish Lead now could be an advantage by smoothing out the normalization process in doing less later
  • Does not see neutral rates rising beyond pre-pandemic levels
  • Even if inflation comes back down the Fed is in a good place for next year.
  • Can keep rates lower
  • Bullard has two hikes priced in for next year.
  • Agrees with the market assessment
  • Fed could move on rates before the taper concludes and could also allow for the runoff of the balance sheet after the taper 

Source: Bloomberg, CNBC

From The TradersCommunity US News Desk

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