The Fed's Bullard says hikes will roll on

According to James Bullard, president of the Federal Reserve Bank of St. Louis, the interest rate should be raised to at least 5-5.25%. After analyzing the current data, Bullard said that his old suggestions to raise the rate to 4.75-5% are now outdated.

It’s noted that after Bullard's statement, the yield on the 10-year U.S. Treasury rose markedly.  The president of the St. Louis Fed, like many others, understands that in order to curb the highest inflation in the last 40 years, raising interest rates is simply necessary.

For example, Mary Daly, president of the San Francisco Fed, has a similar view. She said, from her point of view, a possible rate hike to the 4.75-5.25% level is justified.

Neel Kashkari, president of the Minneapolis Fed, also supported Bullard. He said that until he sees convincing evidence that inflation has stopped rising, he will continue to hold the view that increases are necessary.

Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC, said it's hard to judge the slowing of inflation by one month with a decreasing level. For now, Fed officials, while remaining intent on raising interest rates, are awaiting the November inflation report, which will be released Dec. 13.

The goal of Fed officials is to ensure that the interest rate reaches a level at which it can become a limiter for inflation. According to Bullard's calculations, the rate should then be raised to 5-7%.

Thus, according to Bullard, raising the rate to 5.25% is a good solution, but it isn’t enough to immediately end inflation. The president of the St. Louis Fed said that he would be happy with 5.25%. It’s worth noting that he didn’t specify what amount of increase (50 or 75 basis points) he would be in favor of.

Bullard believes that the rate increases will continue for some time to prevent the sustained high inflation that happened in the 1970s. At the moment, Bullard sees no sign of a decline in inflation, but notes that market pricing suggests a decline within the next year.