Fed’s bullard calls for faster policy tightening, citing “inflation shock”

St. Louis Federal Reserve Bank James Bullard on Friday called on the Fed to start tightening monetary policy, citing surprisingly high inflation, strong economic growth and a very tight labor market poised to strengthen further.

“These considerations suggest that the FOMC at future meetings may consider removing the accommodations at a faster pace,” Bullard told the Missouri Bankers Association, referring to the Federal Open Market Committee that sets US monetary policy at the Fed.

A government report early Friday showing weaker-than-expected job growth in November did not appear to stand in the way of that view. Inflation has risen sharply, he said, adding that he expects to continue to see a “dramatic improvement” in the US labor market.

Bullard has been among the Fed’s most hawkish policymakers, urging the central bank to end its bond-buying program by early next year to put the Fed in a position to start raising prices. interest rate as early as the spring if necessary to contain inflation. Friday’s remarks went further.

It is too early to assess the impact of the emergence of the new Omicron variant of COVID-19 on the U.S. economy, he said.

The Fed’s policymakers will meet on December 14 and 15 and will consider accelerating the cut to its bond buying program, which is currently expected to end by June of next year. Even with the cuts, the Fed is still actively relaxing its monetary policy by buying bonds; interest rates have remained close to zero where they are since March 2020.

Given the unexpected shock to inflation this year and despite remaining pandemic risks, Bullard said “the Federal Open Market Committee (FOMC) should remove the accommodation from monetary policy.”
Source: Reuters (Reporting by Ann Saphir; editing by Dan Burns and Chizu Nomiyama)

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