Bullard Dials Up His ‘Minimum’ Fed Rate View to 5%-5.25% Range

Federal Reserve Bank of St. Louis President James Bullard said policymakers should raise interest rates to at least 5% to 5.25% to curb the highest inflation in nearly 40 years.

“In the past I have said 4.75%-5%,” he told reporters Thursday after giving a speech in Louisville, Kentucky. “Based on this analysis today, I would say 5%-5.25%. That’s a minimum level. According to this analysis that would at least get us in the zone.”

Chair Jerome Powell said earlier this month that rates will need to rise more than previously expected due to disappointing data, while suggesting that officials could moderate the size of their increases going forward. A key inflation reading since then was better than expected but officials continue to stress the need to keep raising rates.

Officials in September had projected rates rising to around 4.6% next year from a current target range of 3.75%-4%. Those projections will be updated at the Fed’s Dec. 13-14 meeting.

San Francisco Fed President Mary Daly said Wednesday that “somewhere between 4.75 and 5.25 seems a reasonable place to think about” for the level that officials should raise rates to then go on hold.

During his presentation, Bullard showed charts that indicated rates will need to be between about 5% to 7% to meet policymakers’ goal of being “sufficiently restrictive” to curb inflation near a four-decade high.

The calculation used different versions of a Taylor Rule, a popular monetary policy guideline developed by Stanford University’s John Taylor.