Bullard Calls for September Rate Hike to Boost Inflation Credibility

Former St. Louis Fed Chief James Bullard is calling for a rate hike in September, citing that it's a 'good time to re-establish credibility on inflation fighting'. According to Bullard, the Fed needs to take action to convince markets that they're committed to getting inflation back down to 2%. He noted that while the latest jobs report was mixed, unemployment remains low and the broader labor market appears stable. By acting now, Bullard believes the central bank can potentially avoid a bigger problem in 2027.

Bullard's comments come ahead of Fed Chair Kevin Warsh's appearance at the Jackson Hole symposium next week. The former St. Louis Federal Reserve President emphasized that it's essential for the Fed to show its commitment to fighting inflation and not just talk about it. He believes that by taking action now, they can send a signal to markets that they're serious about meeting their 2% inflation target.

Bullard also pointed out that the Fed expects core personal consumption expenditures (PCE) to remain above 3% at the end of 2026. He warned that if the central bank doesn't take action, it could lead to a bigger problem in 2027.