Fed's Bullard: Seeing initial rate increase in Q4 of 2022

St. Louis Fed President James Bullard said on Friday that he expects the initial rate increase in the fourth quarter of 2022 but argued that the Fed should be in a position to move sooner if needed, as reported by Reuters.

Additional takeaways

"Inflation expectations generally consistent with Fed's new flexible average inflation targeting framework."

"Risky to wait too long to taper, Fed could be left behind curve given inflation risk, ongoing job growth."

"Risk is Fed would have to really scramble in raising rates if inflation breaks out and that tends to end in recession."

"Preference would be to decide on taper plan at September Fed meeting, start tapering after that."

"Plenty of risk still from coronavirus but Fed policy is tilted too much to the dovish side."

"Indifferent on tapering in larger increments each month versus taking more time, as long as purchases end Q1 2022."

"Nervous over incipient housing bubble, Fed should not feed into that with ongoing asset purchases."

Market reaction

The US Dollar Index continues to edge higher in the American session and was last seen gaining 0.3% on the day at 92.15.