Former Federal Reserve Bank of St. Louis President James Bullard advised policymakers to keep an additional interest-rate increase in their projections for this year, during a National Association for Business Economics webinar on Wednesday. Bullard, currently the dean of Purdue University's business school, believes that from a risk-management perspective, it's essential to retain the extra rate hike based on the latest data.
The U.S. central bank, under Chair Jerome Powell's leadership, is assessing whether its benchmark interest rate is sufficiently restrictive to decelerate demand and guide inflation back to its 2% target. The bank had raised the benchmark rate to a range of 5.25% to 5.5% in July. Consumer prices, excluding food and energy, increased by 4.2% in the year through July.
Fed officials will meet again to decide policy on September 19-20. Futures markets are currently predicting almost no chance of a rate hike at this meeting, though the odds of an increase at their next meeting in November are seen as slightly less than even.
Bullard supports Powell's statement at Jackson Hole that the situation is not over yet as core inflation has not fallen to 2%. He emphasized the need for flexibility going forward due to the possibility of inflation stalling out or even rising slightly higher.
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