The Federal Reserve may have to raise its benchmark interest rate much higher than it has previously projected to get inflation under control, James Bullard, who leads the Federal Reserve Bank of St. Louis, said Thursday.
Bullard’s comments raised the prospect that the Fed’s rate hikes will make borrowing by consumers and businesses even costlier and further heighten the risk of recession. Wall Street traders registered their concern by sending stock market futures further into the red early Thursday. The Dow Jones Industrial Average was down about 330 points shortly before trading began.
Bullard’s remarks followed speeches by other Fed officials in recent days that suggested they see only limited progress, at most, in their use of steadily higher rates to fight inflation.
The Fed’s key short-term interest rate “has not yet reached a level that could be justified as sufficiently restrictive,” Bullard said. “To attain a sufficiently restrictive level, the policy rate will need to be increased further.”