Brad said that the Fed may raise interest rates as early as March financial market news

St. Louis Federal Reserve Bank President James Brad also said that the Fed may shrink its balance sheet in the next step.

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St. Louis Federal Reserve Bank President James Brad said that Fed policymakers may begin to raise the target interest rate as early as March and shrink the central bank’s balance sheet as the next step in response to the soaring inflation.

“The Federal Open Market Committee may begin to raise policy interest rates as early as the March meeting in order to better control inflation,” Brad said when referring to the Federal Open Market Committee, in a speech he was preparing to submit to the CFA Institute . Louis on Thursday. “According to the development of inflation, subsequent interest rate hikes in 2022 may be advanced or postponed.”

Brad has been one of the most hawkish policymakers lately, and he agreed at the meeting last month that the policy committee’s focus is to combat rising prices. According to the minutes of the December 14-15 policy meeting released on Wednesday, Fed policymakers believe that a stronger economy and higher inflation rate may guarantee interest rate hikes “faster or faster than they had previously expected.”

In December, the Federal Open Market Committee announced that it would end the Fed’s bond purchase program at a faster rate than it first proposed at the last meeting in early November, citing rising inflation risks, and its purchase rate will end in March. The meeting also discussed the issue of reducing the balance sheet by not reinvesting maturing securities, but did not make any decision on the timing.

The chart tracks the increase in the Fed’s balance sheet from less than US$1 trillion in 2006 to the current level of US$8.75 trillion

“Asset purchases will end in the next few months, but the FOMC can also choose to allow passive balance sheet runoff in order to reduce monetary easing at an appropriate rate,” Brad said, describing balance sheet changes as “possible downsides.” One step” policy.

Brad’s remarks were tougher than San Francisco Fed President Mary Daley, who said in another event that she supported accelerated downscaling, but did not comment on the subsequent reduction of the balance sheet. “This is a very different conversation from reducing our balance sheet; this will come after we have begun to normalize the federal funds rate,” she said.

Brad, who voted on monetary policy this year, said that the committee is responding to “inflation shocks,” and price increases have reached their highest levels in decades, far higher than policy makers expected a year ago.

“With the real economy strong but inflation far above the target, U.S. monetary policy has shifted to more directly combat inflationary pressures,” Brad said.

Brad expressed optimism about the prospects of the U.S. economy, saying that he is seeking “above-trend growth rate” because the economy has responded to fiscal and monetary support. He stated that he did not see too much risk from the omicron variant, and pointed out that the number of confirmed cases in South Africa has reached a peak and is declining, and the United States may follow this pattern.

This St. Louis Fed official is sometimes the leader of the Fed. He is the first policymaker to suggest that bond purchases should be accelerated and ended before March, so that officials can flexibly raise interest rates in advance. plan.

——With the help of Olivia Rockman.