The Fed: Fed is in danger of losing control of public expectations of future inflation, Bullard says

The Federal Reserve is in danger of losing control of how much inflation American households are expecting, said St. Louis Fed President James Bullard on Wednesday.

“I think we’re on the precipice of losing control of inflation expectations,” Bullard said, in a speech to the Economic Club of Memphis.

“That’s why it is important for the Fed to take action today that’s credible, that will keep inflation expectations low and stable,” he said.

The Fed watches inflation expectations closely. Although difficult to measure, a basic tenant of Fed policy is that keeping inflation expectations low and stable will make it easier to bring inflation down.

Bullard presented a chart with three measures of inflation expectations moving higher.

Inflation has surged over the past year as the U.S. economy has recovered from the pandemic. The Fed’s favorite inflation measure, the personal consumption expenditure index, was running at a 6.3% annual rate in April, well above the Fed’s 2% target.

Bullard has previously said he would like to get the Fed funds rate up to 3.5% rate by the end of the year.

If the Fed hikes interest rates by 50 basis points at both the June and July meeting, as most Fed officials support, the Fed’s benchmark rate will be in a range of 1.75% to 2%.



were down Wednesday but off lows on concerns of persistent inflation. The yield on the 10-year Treasury note

rose to 2.94%.

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