“We have been surprised [by] the upside on inflation. This is a lot of inflation in the US economy,” said Bullard, who is a member of the Fed’s rate-setting committee. “Our credibility is on the line here. We have to react to data. However, I think we can do it in a way that is organized and not disruptive to markets.”
Bullard reiterated his concern that the central bank may not be moving fast enough in response to high inflation, and he repeated his view that the Fed should ramp up interest rates to 1% by July 1. That implies the Fed would need to raise interest rates by half a percentage point in one meeting — a step officials haven’t resorted to since 2000.
“We have to reassure people we are going to defend our inflation target and we are going to get inflation back to 2%,” Bullard said, noting that consumer prices soared in January by 7.5% from the year before.
Scrambled supply chains have been at the heart of the inflation spike and Bullard said his business contacts worry supply chain disruptions will last into 2023.
However, Bullard said he’s not necessarily seeing the Russia-Ukraine tensions as a “leading macroeconomic issue, at least at this point.”