- There's a bit of 'fantasy' when it comes to current policy
- Neutral is not enough to apply downward pressure on inflation
- All it does is that it ceases to put upward pressure
- Getting to neutral won't be enough
- Yesterday's inflation report points to urgency in the Fed to act, feeling behind the curve
- Fed funds rate should move up sharply, endorses a 3% move by Q3
I would argue that there is also a bit of 'fantasy' in thinking that rate hikes will do a whole lot to rein in price pressures in general. I made my case here already. But this is more of a credibility issue for the Fed perhaps, especially in trying to anchor inflation expectations.
I reckon a 50 bps move in May is all but certain at this stage. We'll just have to see if they have the appetite to stick with a more aggressive path in the following months.
Bullard's full interview can be found here (may be gated).
