(Reuters) -St. Louis Federal Reserve Bank President James Bullard on Monday said he expects the Fed to raise interest rates twice in 2022 after it wraps up its bond-buying taper mid-year, though he said if needed the Fed could speed up that timeline to end the taper in the first quarter.
"If inflation is more persistent than we are saying right now, then I think we may have to take a little sooner action in order to keep inflation under control," Bullard said in an interview on Fox Business Network. Asked if the Fed could then raise rates three or four times next year, Bullard said "that is not my base case right now."
The Fed has already "done a lot to move the policy in a more hawkish direction," he said, with the Fed's plan to pare its asset purchases, announced last week, starting earlier and projected to end sooner than had been anticipated just six months earlier.
Bullard has been among the Fed's biggest advocates for an earlier end to the Fed's policy easing, given his worries that inflation may not moderate as quickly or as much as many of his colleagues think it will.
The U.S. economy, he said, will likely grow at a faster than 4% pace in 2022, pushing the unemployment rate down to below 4% in the first quarter. The global supply chain disruptions that are seen as the main cause for currently high inflation are likely to persist throughout next year, he said.
The U.S. labor market is already one of the hottest in the post-World War II era, he said, and it's not likely that the 3 million people he estimates retired during the pandemic will return to the workforce, leaving labor supply tight.
"We are going to see downward pressure on the unemployment rate and we are going to continue to see a very hot jobs market with compensation rising," he said. "We've got quite a bit of inflation here...we definitely want to see that come down closer to our inflation target."