After dipping into bear market territory, the S&P 500 experienced a bit of a midday bounce on Friday following some uncharacteristically dovish comments from St. Louis Federal Reserve Bank President James Bullard.
What Happened? In an interview with Fox Business Network on Friday, Bullard echoed his previously stated belief that the Fed should raise interest rates to 3.5% by the end of 2022 to rein in inflation. Yet Bullard also seemingly opened the door for a hasty Fed retreat if inflation starts to fall.
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"The more we can frontload and the more we can get inflation and inflation expectations under control, the better off we will be," Bullard said. "And in the out years, '23 and '24, we could be lowering the policy rate because we've got inflation under control."
Why It's Important: Throughout 2022, Bullard has been one of the most hawkish Fed members, repeatedly calling for 0.5% rate hikes and even suggesting a 0.75% hike was possible at one point.
Bullard is a voting member of the Federal Open Market Committee, so investors monitor his words closely.
The prospect of a sharp rise in interest rates is one of the primary reasons the SPDR S&P 500 ETF Trust (NYSE:SPY) has taken such a beating so far in 2022. Fortunately, Bullard's comments suggest even the most hawkish FOMC members are looking to potentially dial back interest rates quickly as soon as inflation is in check.
Benzinga's Take: Even after the modest Bullard-fueled bounce, the S&P 500 was still down nearly 2% on Friday and in bear market territory heading into the close. At this point, investors seem far more concerned about how high interest rates will rise in 2022 than about the possibility of them coming back down in 2023 and beyond.
