Fed’s Bullard favors more rate hikes as labor market remains strong – Reuters

By Sam Boughedda

St. Louis Federal Reserve President James Bullard told Reuters in an interview Tuesday that the U.S. central bank should continue raising following recent data which showed inflation remains persistent.

In addition, Bullard noted that the economy seems set to continue growing, even if slowly.

He told Reuters that Wall Street is “very engaged in the idea there’s going to be a recession in six months or something,” but he added that it “isn’t really the way you would read an expansion like this.”

While investors may believe rate cuts are to come as a recession is on the horizon, Bullard countered by stating, “The labor market just seems very, very strong,” and the conventional wisdom is that if you have a strong labor market, it leads to strong consumption and, as a result, it “doesn’t seem like the moment to be predicting that you have a recession in the second half of 2023.”

However, even with the current at 3.5%, at the Fed’s March 21-22 policy meeting, they said they anticipate a “mild recession” this year.

Speaking on the recent banking crisis, Bullard said that if two U.S. bank failures were going to spark a crisis, it would likely be showing up in things like the St. Louis Fed’s financial stress index.

Reuters said that while the index spiked after the collapse of Silicon Valley Bank on March 10, it quickly reverted to normal.

“If you were really going to get a major financial crisis out of this, that index would spike up to a four or five. It’s zero now. So it doesn’t look, as of this moment, like too much is happening,” Bullard told the publication.

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