HomeFinancial MarketsSt. Louis Fed President States That Rate Hikes Are Aimed At Inflation,...

St. Louis Fed President States That Rate Hikes Are Aimed At Inflation, Not Banking Crisis

Federal Reserve Bank of St. Louis President James Bullard explained in an essay posted on his bank’s website on Tuesday that the Federal Reserve’s interest rate hikes are being used to curb inflation, adding that the ongoing instability in the banking sector can be managed using regulatory policies.

“In my view, continued appropriate macroprudential policy can contain financial stress in the current environment, while appropriate monetary policy can continue to put downward pressure on inflation,” Bullard wrote. He went on to pin recent financial stress on the recent bank failures, adding that “the macroprudential policy response” adopted by the Federal Reserve appeared to be appropriate given the circumstance.

On March 22, the Federal Reserve announced an interest rate hike of 25 basis points while pushing their policy benchmark upwards to the target range of 4.75% to 5%.

Bullard has raised his own end-of-year forecast by 25 basis points to 5.625%, with 18 other officials expecting interest rates to hit 5.1% by the end of the year. This comes as economic data remains resilient with low unemployment of 3.6% as well as consistent consumer spending.

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