Fed's Bullard says the central bank's ‘credibility is on the line,' needs to ‘front-load' rate hikes
St. Louis Federal Reserve President James Bullard made his case for a rapid move higher in interest rates, saying Monday that the central bank needs to react to accelerating inflation.
“I do think we need to front-load more of our planned removal of accommodation than we would have previously. We've been surprised to the upside on inflation. This is a lot of inflation,” Bullard told CNBC's Steve Liesman during a “Squawk Box” interview.
“Our credibility is on the line here and we do have to react to the data,” he added. “However, I do think we can do it in a way that's organized and not disruptive to markets.”
Those comments came after Bullard rattled markets last week by saying he thinks the Fed should raise its benchmark short-term borrowing rate a full percentage point by July. The position, in a Bloomberg News interview, sent stocks on a volatile ride and caused futures markets to price in as many as seven quarter-percentage point hikes by the end of 2022.
Along with that, markets are now tilting to a 50 basis point, or 0.5 percentage point, increase at the March meeting.
“I think my position is a good one, and I'll try to convince my colleagues that it's a good one,” Bullard told CNBC.
Stock market futures were mildly lower Monday morning as he spoke, rising from previous levels on some encouraging news out of the Russia-Ukraine hostilities.
While virtually all officials on the Federal Open Market Committee have expressed the desire to start raising rates in March, Bullard has been perhaps the most hawkish. Several other officials have said they think a quarter-point move at the upcoming meeting would suffice.
“History tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we're trying to achieve,” San Francisco Fed President Mary Daly said Sunday on CBS' “Face the Nation.” “So, what I would favor is moving in March and then watching, measuring, being very careful about what we see ahead of us and then taking the next interest rate increase when it seems the best place to do that.”
But Bullard insisted that inflation has been running hot for months and the Fed needs to be forceful in using its tools to control price increases.
Inflation is ‘very bad' for lower-income groups
The consumer price index for January showed a 12-month increase of 7.5%, even more than Wall Street estimates and continuing a pattern that began in the back half of 2021.
“My interpretation was not so much that report alone, but the last four reports taken in tandem have indicated that inflation is broadening and possibly accelerating in the U.S. economy,” Bullard said.
Even with strong inflation gains, real incomes have been mostly declining as inflation is outpacing the rise in average hourly earnings.
“The inflation that we're seeing is very bad for low- and moderate-income households,” he said. “People are unhappy, consumer confidence is declining. This is not a good situation. We have to reassure people that we're going to defend our inflation target and we're going to get back to 2%.”
Markets will get a look later this week into Fed thinking when the FOMC releases minutes from its January meeting. One area of interest will be in how the central bank will begin reducing the nearly $9 trillion in asset holdings, which doubled during the coronavirus pandemic as the Fed bought up trillions in Treasurys and mortgage-backed securities.
Despite the inflation surge, the Fed intends to buy $20 billion more of Treasurys over the next month along with nearly $28 billion in MBS, before ending the program in March.
Bullard said he'd like to see a reduction in the bond holdings to begin in the second quarter with “some plan B in our pocket” where the Fed might actually sell the assets outright rather than letting proceeds run off passively.
Correction: San Francisco Fed President Mary Daly spoke on CBS' “Face the Nation.” An earlier version misstated the network.
圣路易斯联邦储备银行总裁詹姆斯布拉德周一表示，央行需要对加速通胀做出反应，支持迅速提高利率。 “我确实认为，与以前相比，我们需要提前完成更多的计划搬迁。我们对通胀上行感到惊讶。这是很多通货膨胀，”布拉德在接受“Squawk Box”采访时告诉 CNBC 的史蒂夫·利斯曼。
他补充说：“我们的可信度在这里，我们必须对数据做出反应。” “但是，我确实认为我们可以以一种有组织且不会破坏市场的方式来做到这一点。”
这些言论是在布拉德上周震惊市场之后发表的，他表示他认为美联储应该在 7 月之前将基准短期借款利率提高一个百分点。在接受彭博新闻采访时，这一头寸导致股市震荡，并导致期货市场预计到 2022 年底将上涨多达 7 个 25 个百分点。
与此同时，市场现在倾向于在 3 月会议上上涨 50 个基点或 0.5 个百分点。
“我认为我的职位很好，我会努力让我的同事相信这是一个很好的职位，”布拉德告诉 CNBC。
在他讲话时，周一上午股市期货小幅走低，由于俄罗斯和乌克兰敌对行动的一些令人鼓舞的消息，股市期货从之前的水平上涨。
尽管联邦公开市场委员会的几乎所有官员都表示希望在 3 月开始加息，但布拉德可能是最鹰派的。其他几位官员表示，他们认为在即将召开的会议上采取 2/4 个百分点的举措就足够了。
旧金山联储主席玛丽戴利周日在哥伦比亚广播公司的“Face the Nation”节目中说：“历史告诉我们，美联储的政策突然而激进的行动实际上会对我们正在努力实现的增长和价格稳定产生破坏性影响。” “所以，我更倾向于在 3 月采取行动，然后观察、衡量，对我们眼前的情况非常小心，然后在似乎是最好的时机进行下一次加息。”
但布拉德坚称，通胀数月来一直居高不下，美联储需要强有力地使用其工具来控制物价上涨。
通货膨胀对低收入群体来说“非常糟糕”
1 月份的消费者价格指数显示了 7.5% 的 12 个月增长，甚至超过了华尔街的预期，并延续了从 2021 年下半年开始的模式。
“我的解释不仅仅是那份报告，但最后四份报告一并显示，美国经济的通胀正在扩大，并可能加速，”布拉德说。
即使通胀强劲增长，实际收入也大多下降，因为通胀速度超过了平均每小时收入的增长速度。
“我们看到的通胀对中低收入家庭来说非常不利，”他说。 “人们不高兴，消费者信心正在下降。这不是一个好情况。我们必须向人们保证，我们将捍卫我们的通胀目标，我们将回到 2%。”
当 FOMC 公布 1 月会议纪要时，市场将在本周晚些时候了解美联储的想法。一个令人感兴趣的领域将是中央银行将如何开始减少近 9 万亿美元的资产持有量，在冠状病毒大流行期间，随着美联储购买数万亿美元的美国国债和抵押贷款支持证券，资产持有量翻了一番。
尽管通胀飙升，美联储仍打算在下个月再购买 200 亿美元的美国国债以及近 280 亿美元的 MBS，然后在 3 月结束该计划。
布拉德表示，他希望看到从第二季度开始减少债券持有量，“我们口袋里有一些 B 计划”，美联储实际上可能会直接出售资产，而不是让收益被动流失。
