New Interest Rate Hike Coming, Report Reveals

( The president of the Federal Reserve Bank of St. Louis said he supports increasing interest rates by a full percentage point by July.

In an interview with Bloomberg last Thursday, St. Louis Fed President James Bullard said he’d like to see “100 basis points in the bag by July.” He admitted that he was “already more hawkish,” but has “pulled up dramatically” what he thinks the Federal Reserve committee should do.

Between now and July 1 there will be three Fed meetings, in mid-March, early May, and mid-June, and Bullard is considering a half-point hike in the interest rate at a single meeting. That hike would be the largest of any recent rate-hiking cycles.

Bullard’s remarks followed the recent report that the Consumer Price Index increased 7.5 percent, making it the largest 12-month increase in four decades. The skyrocketing inflation presents a challenge to the Fed as they are forced to find ways to combat high prices without hampering economic growth.

Bullard doesn’t believe his proposed interest rate hike is “shock and awe.” Instead, he thinks it is a sensible response to the unexpected increase in inflation during the previous year.

According to the Wall Street Journal, following Bullard’s comments in Bloomberg, on Thursday, major stock benchmarks turned sharply lower, finishing in the red. The S&P 500 dropped for the first time in three days by 83.1 points, or 1.8 percent, to 4504.08. The Down Jones Industrial fell 526.47 points, or 1.5 percent to 35241.59 while the Nasdaq was down 304.73 points, or 2.1 percent, to 14185.64.

According to Ken Crawford, portfolio manager of Argent Capital Management’s large-cap growth strategy, given the inflation rate, Bullard’s position on interest rate hikes is “realistic” especially for those who lived through the 1970s. Crawford said for people who didn’t live through the 1970s and are wondering what is happening, it would have been peculiar to hear nothing from anyone in the Federal Reserve.