Financial markets did not like what they heard
“Hawkish” was the word used to describe the following remarks by James Bullard, president of the Federal Reserve Bank of St. Louis: “The pandemic is coming to a close here,” Bullard said, “so it's very natural that we start thinking about how to pare back emergency measures.”
Pare back emergency measures — a move that could happen before 2023, Bullard indicated. Inflation concerns are driving this thinking by the Fed. Stocks retreated on the commentary.
“We have not seen inflation like that in the U.S. on a sustained basis for a very long time,” Michael Schumacher of Wells Fargo Securities told CNBC. “This really gets at what the people in the market are focused on: Just how long is that inflation spike going to last? Is it transient? Is it transitory? I don’t know. But it’s troubling, that’s pretty clear.”
A number of other central banks around the world signaled rate hikes before the Fed. As Columbia Law School professor Kathryn Judge pointed out, the reason for that is the Fed’s dual mandate: Our central bank is not only tasked with sticking to inflation targets, but has to stay focused on unemployment, too. That’s a tall order right now.
Related reading from marketplace.org: How hard is it to get cost-of-living raises during times of inflation?