The US Federal Reserve is waiting for quick measures due to high inflation

The president of the Federal Reserve Bank of St. Louis, James Bullard, said that the high level of inflation requires the Fed to take quick action. At the same time, he believes that the bond market will be able to calmly survive changes in monetary policy.

Bullard advocates raising the key rate by 1 percentage point by July, as well as starting to reduce the Fed's asset portfolio in the second quarter, the volume of which is close to $9 trillion. The head of the Federal Reserve Bank also noted that at the moment it will be enough for the central bank to reduce the balance passively, simply without replacing redeemable bonds.

«The best response in this situation is to cancel a significant portion of the stimulus at the beginning of the policy tightening cycle,» Bullard said. 

Bullard is known as an ardent supporter of raising interest rates in order to combat inflation. According to him, when the Fed starts raising the key rate from levels close to zero, it will still support the economy, and the risks of a potential recession are extremely small. 

Bullard's views are also shared by the President of the Federal Reserve Bank of Cleveland, Loretta Mester, who, like Bullard, is a voting member of the Open Market Operations Committee. Mester said that she considers it appropriate to raise the key rate in March and continue raising it in the following months.

However, some Fed officials do not share Bullard and Mester's desire to aggressively raise interest rates. San Francisco Fed President Mary Daly said she agreed with the increase in March, but in the future it will be necessary to wait for the data before deciding anything. The president of the Federal Reserve Bank of Minneapolis, Neil Kashkari, said that in the event of an aggressive rate hike, «we risk dramatically slowing down the economy and plunging it into recession.»