Stocks tumbled after St. Louis Federal Reserve President Jim Bullard said in an interview that it’s possible the Fed could increase interest rates a quarter point as early as late 2022 if the US economy continues its recovery, CNBC reports.
Earlier this week, Federal Reserve President Jerome Powell said that the board foresees two separate quarter-point rate increases in 2023 and tapering off its $120 billion per month bond repurchase program as the US economy improves.
“Overall, it’s very good news,” Bullard, appearing on CNBC’s “Squawk Box” Friday morning, said of the economic trajectory during the reopening. “You love to have an economy growing as fast as this one, you love to have a labor market improving the way this one has improved.”
“We’re expecting a good year, a good reopening. But this is a bigger year than we were expecting, more inflation than we were expecting,” Bullard said. “I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.”
Bullard said inflation for 2021 is expected to finish up around 3% before retreating to 2.5% in 2022 and fall to the target of 2% in 2023. The increase in inflation in 2021 is due to a variety of factors, including increased post-pandemic demand and current supply chain delays in goods such as computer chips, lumber and cars.