St. Louis Fed president calls for interest rate minimum to be set at 5%

Nov. 17 (UPI) -- Federal Reserve Bank of St. Louis President James Bullard urged policymakers to raise interest rates to over 5%, in an effort to curb the highest inflation in 40 years.

Speaking in Louisville, Bullard said that the record levels of inflation call for higher rates than he would normally advise.

"In the past I have said 4.75%-5%," he told reporters Thursday, according to Bloomberg. "Based on this analysis today, I would say 5%-5.25%. That's a minimum level. According to this analysis that would at least get us in the zone."

Earlier this month, the Federal Reserve raised the target federal funds rate by another 0.75 percentage point, or 75 basis points to a range of 3.75% to 4%. Chairman Jerome Powell has indicated the central bank will continue to raise rates until inflation returns to 2%.

The Fed said in a statement, "Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures."

According to Bloomberg,

San Francisco Federal Reserve Bank President Mary Daly said Wednesday that a federal funds rate between 4.75% and 5.25% "seems a reasonable."

However, Bullard has argued that even 5.25% may not be enough.

"It's easy to make arguments that before this is all over you'd have to go to much higher levels of the policy rate" than 5.25%, said Bullard, who votes on policy this year. "But for now I'd be happy to get to the minimal level and that's why I think the committee is going to have to do more."

Investors expect the Fed will raise rates by a half percentage point next month and see rates peaking around 5% next year.