Even under a 'generous' analysis of monetary policy the Federal Reserve needs to continue raising interest rates probably by at least another full percentage point, St. Louis Federal Reserve President James Bullard said, arguing that rate hikes so far 'have had only limited effects on observed inflation.'
St. Louis Fed President James Bullard speaks about the U.S. economy during an interview in New York February 26, 2015. REUTERS/Lucas Jackson/File Photo
In a graphic presented for discussion at an economic event in Louisville, Bullard showed that using even "dovish" assumptions, a basic monetary policy rule would require rates to rise to at least around 5%, while stricter assumptions would recommend rates above 7%. A measure of "core" inflation watched closely by the Fed and used in Bullard's analysis was running at 5.1% as of September, twice the Fed's target, leaving Fed officials aligned in favor of further rate hikes even as they discuss the pace and final destination of their policy tightening cycle.
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