St. Louis Federal Reserve Chairman James Bullard sees an initial interest rate hike as early as 2022 as inflation rises faster than previously expected. The Fed exponent, interviewed by CNBC, remarked that the expectations are now a year better than expected on the front of the economic recovery and inflation is also going beyond expectations.
Bullard’s estimate is more hawkish than the averages that emerged from the Federal Open Market Committee (FOMC) this week, with dot plots pointing to up to two increases in 2023.
According to Bulard, the pandemic is about to end and it is natural that at some point stimuli will be reduced and the central bank will become more hawkish to contain inflationary pressures. Bullard estimates inflation to run at 3% this year and 2.5% in 2022 before returning to the Fed’s 2% target.
Wall Street futures accelerated to the downside following Bullard’s words (down more than 1 percent for the Dow Jones) with the return of fears of tapering. The Dow Jones is starting to close the worst week since January. The EU stock exchanges are also bad with around -1.5% for the Ftse Mib and Dax.