St. Louis Federal Reserve President James Bullard doubled-down on his view that deeper near-term rate hikes are need to tame domestic price increases, telling CNBC Monday that inflation is 'broadening and accelerating' in the world's biggest economy.
Bullard, who last week said that the Fed needs to increase interest rates by around 1% between now and July 1 following last week's reading of January inflation (the fastest since 1982) repeated that view today, adding that the kind of increases needed -- be it a half point increase or sequential increases of a quarter of a point -- would be determined by both the Open Markets Committee and Fed Chairman Jerome Powell.
"The last four inflation readings, taken in tandem, suggest that inflation in broadening and and possibly accelerating in the US economy so I shaded up my position to show that I think we need 100 basis points of tightening by July 1," Bullard, a voting member of the Open Markets Committee, told CNBC.
U.S. equity futures pared earlier gains in the wake of Bullard's remarks, with contracts tied to the Dow Jones Industrial Average indicating a 95 point opening bell decline and those linked to the S&P 500 priced for a 20 point pullback.
The chances of a 50 basis point rate hike next month, based on the CME Group's FedWatch tool immediately jumped from 49% to 66% in the wake of Bullard's remarks, while benchmark 10-year Treasury note yields jumped to 1.981%.
The odds of Saturday rate hike between now at the March meeting, only the second since 1979, have jumped to around 25%, according to data from Bank of America's weekly "Flow Show" report, following Thursday's faster-than-expected inflation reading which showed headline consumer prices rising a 7.5% clip, the fastest since 1982 and well ahead of the 7.1% pace recorded in Mexico -- where base rates sit at 5.5% -- over the same month.
However, those odds have slipped in recent days following the publication of a new $33.3 billion bond-buying schedule from the Fed that lasts into early March, a move analysts see as incompatible with interest rate increases.
