Federal Reserve Bank of St. Louis President James Bullard continues to back raising interest rates by 1 percentage point by July 1 and sees little impact on the U.S. outlook from Russia’s invasion of Ukraine.
“The direct linkages to the U.S. economy are minimal so I wouldn’t expect that much impact directly on the U.S. economy,” Bullard said Friday during an interview with SiriusXM Business radio. “Of course, we will have to watch this very carefully and see what happens in days ahead.”
Bullard’s remarks chime with comments from other officials backing liftoff next month, including his former St. Louis Fed colleague Governor Christopher Waller, who saw a strong case for a half-point move if the economic numbers keep coming in hot.
“The fighting in Ukraine is something that has been around off and on for the last couple of decades, so in that sense it is not really that new,” Bullard said. “This is a bigger, more aggressive Russia here but I think the baseline expectation has to be there will not be a wider war associated with this. There are risks around that.”
Bullard said he is continuing to urge that policy makers start shrinking the balance sheet in the second quarter, in addition to the rate hikes that would include one half-point hike over the next three meetings.
“We haven’t really moved fast enough given the inflation developments,” Bullard said. After raising the policy rate 1 point by July 1, “then we could assess at the point where we are at and what the next steps would be.”
Data on Friday showed the Fed’s preferred gauge of price pressures rising 6.1% in the 12 months through January — three times their 2% target and the most since 1982. Officials get another important piece of evidence next Friday with February’s employment report.
