Fed’s Bullard warns colleagues to not’stall’ on rate increases

WASHINGTON, (Reuters) – James Bullard of St. Louis Fed said Wednesday that the U.S. Federal Reserve should raise its policy rate of interest to above 5% before allowing for rate increases to fight an ongoing epidemic of inflation.

Bullard answered “Why not go to ?… Where we’re supposed” when asked by Wall Street Journal whether he was open for a further half-point rate increase at the Fed meeting.

Recent Fed projections indicated that policymakers expected to increase the target rate from the current range between 4.2% and 5% to 5%. However, officials have stated that they are open to quarter point increases at future meetings.

Fed funds futures investors believe that this is what the Fed will do at its next meeting, which takes place on January 31-Feb. 1.

Bullard stated that he believes the policy of “frontloading” rate increases with larger three and a quarter-point or half-point increases has worked well. He also said that he did not see any reason to stop the rate from rising until it is near the level considered to be a stopping point.

According to December projections, the median official estimated that the “terminal” rate would be around 5.1%.

With inflation risks remaining higher than expected and economy performing better than expected, “let’s move policy rate to the correct level…then let’s see how 2023 unfolds.”

Bullard is not a voting member this year of the Federal Open Market Committee.

(Reporting by Howard Schneider, Editing by Chizu Namiyama and Andrea Ricci).