The Federal Reserve needs to 'front-load' rate hikes to save the central bank's credibility in the face of soaring inflation, St. Louis Fed's James Bullard says
- The central bank needs to accelerate its pace of hiking interest rates as inflation surges, said St. Louis Fed chief James Bullard.
- "I do think we need to front-load more of our planned removal of accommodation than we would have previously," he told CNBC.
St. Louis Fed President James Bullard said the central bank needs to accelerate its pace of hiking interest rates as inflation surged to its highest since 1982 in January.
Stocks reversed lower in pre-market trade after the comments, which came after similarly hawkish remarks from him last week triggered a steep sell-off.
"I do think we need to front-load more of our planned removal of accommodation than we would have previously," Bullard told CNBC Monday. "We've been surprised to the upside on inflation. This is a lot of inflation."
On Thursday, the Labor Department reported the Consumer Price Index – a commonly used measure of US inflation – rose 7.5% year-over-year in January, marking its strongest price growth since February 1982. It was also an acceleration from the December pace of 7.1%.
Bullard added that CPI reports from the last four months combined had formed his more hawkish stance on Fed rate hikes. They indicate inflation is broadening and heating up instead of signaling it was naturally going to moderate in any "reasonable timeframe."
"Our credibility is on the line here and we do have to react to the data," he told CNBC, adding that the Fed needs to get inflation back to its 2% target. "However, I do think we can do it in a way that's organized and not disruptive to markets."
Last week, Bullard told Bloomberg that he favors a 50-basis-point rate hike at the upcoming meeting in March, and wants a total of 100 basis point rate hikes by July.
He doubled down on his comments Monday, adding that he will "convince" his colleagues of his stance, which he believes is a "good one."
Bullard also pointed out that low- and moderate-income households are most affected by high inflation.
"People are unhappy, consumer confidence is declining," he told CNBC. "This is not a good situation. We have to reassure people."