In a recent interview with CNBC, Jim Bullard, President of the Federal Reserve Bank of St. Louis, had a lot to say on the current state of the U.S. economy. His comments about the possibility of upcoming interest hikes has raised a lot of questions in the market.
Speaking on CNBC’s “Squawk Box,” Bullard suggested that the Federal Reserve may hike interest rates as early as the end of 2022. This is in contradiction to an earlier statement by the Federal Open Market Committee (FOMC) that had articulated the Fed’s official policy. According to the FOMC, interest rates will remain unchanged until 2023. Rates will then be raised twice over the course of 2023.
This earlier forecast from Bullard comes as part of an overall positive assessment of the state of the U.S. economy. He said, “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.” Unemployment is going down, and there has been significant GDP growth.
Bullard stressed that the Fed needs to be “nimble” and adaptable in the face of such a dynamic and rapidly changing economy. Despite his overall optimism, he acknowledged that a lot can change in the next two years and the FOMC will have to respond to changes in the market as they develop.
These comments had a marked impact on the stock market. Dow futures tumbled 300 points in the wake of Bullard’s appearance on CNBC. It should be added that while all fed presidents sit on the FOMC, he is not currently a voting member. He will be next year, however, according to FOMC’s yearly rotation.