St. Louis Fed’s Bullard says the central bank should raise rates above 3% this year

The president of the St. Louis Fed thinks the central bank should raise interest rates 12 times this year to convince the public it is serious about fighting inflation.

At the Federal Reserve's meeting this week, the lone dissenter was James Bullard, who wanted the central bank to raise its benchmark interest rate to 3%.

He said that this would quickly adjust the policy rate to a more appropriate level.

The Federal Open Market Committee decided on Wednesday to raise the overnight rate for banks by 0.25 percentage point, a typical increment with which the committee moves. The path this year would see the equivalent of seven rate hikes, or 1.75 percentage points.

The Fed raised the rate for the first time in over a year in response to a surge in inflation that has seen prices rise at their fastest pace in 40 years.

The only member of the Federal Open Market Committee who voted against the move was James Bullard, who wanted a rate hike of 50 basis points. He said the Fed should have started the process of reducing its bond holdings.

The Fed is trying to help those on the lower rungs of the economic ladder because of inflation.

The burden of excessive inflation is particularly heavy for people with modest incomes and wealth, and for those with limited ability to adjust to a rising cost of living.

Fed officials were not sure how to proceed with rates this year.

The fed funds rate should be 2% by the end of the year, according to eight members. The committee's dot plot indicated a range of 3% to 3%.

He said that the Fed moved that aggressively in 1994-95 to combat a revved economy and gradual rise in inflation.

The Committee achieved 2% inflation on average and the U.S. economy boomed during the second half of the 1990s. I believe the Committee should try to achieve the same outcome in the current environment.

The central bank should have a plan for the Fed's balance sheet at this week's meeting, according to the Fed's president.

The committee expects to begin reducing its holdings of Treasury securities and agency debt at a meeting in May, according to the post-meeting statement.