Hawkishness all over the place and Fed’s Bullard Says 75 Basis-Point Hike Could Be Option. As a note, we know that Bullard is the most hawkish Fed member. A known hawk, Bullard has advocated for the Fed to raise interest rates more quickly and aggressively. As the only one to vote against the 8-1 decision in March, he proposed a 50-basis-point increase in interest rates and has also advocated for a reduction in the balance sheet.
But the seems like the 50 bps hike for the next FOMC meeting is starting to priced in now as other Central Banks already in hawk mode. The Bank of Canada and Reserve Bank of New Zealand both this month raised their benchmark rates by 50 basis points. Their biggest moves in 22 years, indicating a new sense of urgency among policy makers to calming down the inflation.
But this signal from Bullard is indicating that the other policy makers starting to get into the same page. In this case we expect the next FOMC meeting staring to pricing in for 50 bps hike and it’s probably a done deal. In addition, Fed Chair Jerome Powell has said that a 50 basis-point increase is possible at the Fed’s May 3-4 meeting.
Minutes of their March meeting showed many Fed officials favored raising rates by a half point and only opted for the more cautious 25 basis-point move because of the uncertainty around Russia’s invasion of Ukraine. The account showed officials expect to start shrinking their balance sheet by $95 billion a month, or more than $1 trillion a year, and could announce a decision in May. Governor Lael Brainard said April 12 that could mean roll-off as soon as June.
The account showed officials expect to start shrinking their balance sheet by $95 billion a month, or more than $1 trillion a year, and could announce a decision in May. Governor Lael Brainard said April 12 that could mean roll-off as soon as June.
Here is the some commentary from Bullard at virtual presentation to the Council on Foreign Relations on Monday:
“More than 50 basis points is not my base case at this point,”
“We want to get to neutral expeditiously, I guess is the word of the day,”
“I wouldn’t rule it out, but it is not my base case here.”
“You can’t do it all at once, but I think it behooves us to get to that level by the end of the year,”
“I’ve even said we want to get above neutral as early as the third quarter and try to put further downward pressure on inflation at that point.”