Hawkish comments from Bullard hit indices 📉

St.Louis Federal Reserve chief James Bullard today shared his comments on monetary policy and the US economy:

• Bullard suggested that the Fed's interest rates could be in a range between 5%-7%, with the 5% level possibly being the lower bound. Even dovish assumptions about the current state of monetary policy justify additional rate hikes;
• Fed policy to date is not yet restrictive enough to reduce inflation. Bullard decided not to give a forecast for a rate hike at the Fed's next meeting in December;
• According to Bullard, hikes have had a limited impact on inflation so far, and interest rates still need to be raised to reduce price pressures in the economy;
• If inflation declines, the range of restrictive policy estimates may be reduced as markets estimate a decline in inflation in 2023. Caution in further tightening is warranted, given that markets and the Fed have been expecting inflation to fall for more than a year;

• The baseline scenario is an economic slowdown, although the risk of recession has increased recently. Inflationary risks may now be elevated as a result of the Fed's restrictive actions, although its materialization is not the baseline scenario.

• Many of the pro-inflationary supply chain issues have receded over the past six months. The US labor market still looks very good. If inflation declines in 2023 there is the potential for very good momentum.

The Fed interest rate has been raised by 75 bps for 4 meetings in a row. The Fed suggests that increased financial stress is possible in such a situation, however, the data still gives room for a higher rate level and does not show a definite increase in financial stability risks. The St.Louis Federal Reserve indicates a relatively low level of financial stress so far, despite the higher interest rate level. Source: Saint Louis FedUS500 is under supply-side pressure today. Bullard's comments have added to the bears' arguments and suggest that the Federal Reserve is still far from a firm pivot despite last lower inflation reading. US Dollar strenghten. Source: xStation5