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Federal Reserve's Bullard Expects Two Rate Hikes Next Year

Olivia Michael | CNBC
  • Central banks would usually push up rates to tame inflation and the Fed has started to normalize policy after the economic fallout from the coronavirus pandemic.
  • It said last week that bond purchases would start to taper "later this month."
  • The Fed also acknowledged that price increases had been more rapid and enduring than central bankers had forecast.

St. Louis Federal Reserve President James Bullard told CNBC that he's currently expecting the U.S. central bank to hike its benchmark rate twice in 2022, after it's finished with winding down its bond-buying program.

Bullard added the caveat that his viewpoint was based on current economic data and that his prediction could change as time progresses.

"What we can do is assess the situation next spring and see where we're at, and at that point we can make a decision about raising the policy rate," Bullard told CNBC's Julianna Tatelbaum in an interview recorded Tuesday at the UBS European Conference.

"Based on where I think we are today I actually have two rate increases penciled in for 2022 ... that could change by the time we get into the first half of next year in either direction really."

Bullard, known to be more hawkish than other officials at the bank, has shown some anxiety at the surging levels of inflation. Indeed, new data out Tuesday showed U.S. wholesale prices rose 8.6% from a year ago in October, their highest annual pace in records going back nearly 11 years.

Central banks would usually push up rates to tame inflation and the Fed has started to normalize policy after the economic fallout from the coronavirus pandemic. It said last week that bond purchases would start to taper "later this month" and acknowledged that price increases had been more rapid and enduring than central bankers had forecast.

The Fed voted not to raise interest rates from their anchor near zero, and warned against expecting imminent rate hikes. On the current schedule, the reduction in bond purchases will conclude around July of next year. Officials have said they don't envision rate increases beginning until tapering is finished, and projections released in September indicate one hike at most coming next year.

Bullard is not a voting member on the Fed's policymaking committee in 2021, but will be in 2022.

— CNBC's Jeff Cox and Thomas Franck contributed to this article.

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