Bullard Recap: Too Soon To Say If Need 75bp Hike In Dec

Speaking Saturday on the sidelines at IMF and WB meetings, Bullard (’22 voter) said last week’s stronger-than-expected CPI report vindicated the Fed’s front-loading strategy.

• Near-term rates: Too soon to say if need to pull forward tightening into Dec with another 75bp hike, supports another 125bp of hikes this year i.e. the median 4.25-4.5% rather than the lone dot higher for 4.5-4.75% in the Sept SEP.
• Broader path: “2022 is the year of frontloading but 2023 would be the year of data-dependence or ordinary monetary policy at this newer, higher level of the policy rate." Fed’s aggressive hikes so far have made relatively small waves in financial markets. The Fed will be reacting to data in 2023 with two-sided rate risk but there is a bullish case to be made for 2023, still noting the risk that inflation could come in higher.
• QT: "I would like it to be in place for some time”. He is hearing more from his contacts about liquidity issues and is attuned to the issue but still "way too early" to say the central bank would change its QT plans anytime soon.
• FX: Fed policy "has produced a stronger currency". That may ease once the Fed gets rates to a place "where the committee thinks we're putting meaningful downward pressure on inflation" and rates don't need to continue rising.