Investing.com - St. Louis Fed president James Bullard warned on Wednesday that with inflation on the rise, the possibility of the U.S. central bank falling behind on the curve on removing accommodative monetary policy had increased “modestly”.
Bullard explained that his concern was based on the fact that he saw PCE and core PCE rising to above 2% in 2017 and also saw the jobless rate falling to 4.5%.
Although he insisted that he felt the Fed was in “good shape” on monetary policy, he admitted that the “odds that we will fall somewhat behind the curve have increased modestly”.
In that light, he suggested that there could be a case for the Fed to make a move at the April meeting.
Bullard's comments follow a string of hawkish comments by other Federal Reserve officials, but could hold more weight on market sentiment since the St. Louis Fed forms part of the Federal Open Market Committee (FOMC) and thus holds voting rights on policy decisions this year.
Additionally, Bullard discussed his concerns over the so-called “dot plot” that provides individual Fed member projections of the future path of rate hikes.
“I’ve even thought about dropping out unilaterally from the whole exercise,” he said.
Concern over interpretations of the dot plot were also brought up on Wednesday by former Minneapolis Fed president Narayana Kocherlakota who stated in a Bloomberg op-ed that “investors and the media consistently misinterpret it”.
Kocherlakota explained that the dot plot does not reflect officials’ interest-rate forecasts, but “rather, it shows what each participant thinks the Fed should do, based on his or her individual forecast of how the economy will evolve and what the optimal response would be”.