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The economic outlook, including the Federal Reserve’s shift to a less easy policy stance, shouldn’t necessarily cause the stock markets to suffer, said St. Louis Fed President James Bullard on Monday.
“I’m really not seeing any threat to the market at this point,” Bullard said.
Corporate earnings “will be just fine,” Bullard said. The economy should grow at a 3.5%-4% annual rate this year, aided, by the fading effect of the omicron variant. This will lead to a “second sort of reopening of the U.S. economy,” he said.
Bullard repeated that he would like the Fed to raise its policy rate by 100 basis points by July 1.
Asked if this meant a 50 basis point move in March, Bullard said he would defer to the leadership of Fed Chairman Jerome Powell.
“I think the path I’m mapping out is a good one given the information that we have as of today,” Bullard said.
“Maybe it does involve some repricing of the U.S. corporate sector. U.S. equities have been very strong through the pandemic… and I don’t see any reason that can’t continue during 2022 here, even if the Fed decides to front load some of the removal of accommodation that we’ve been previously considering,” he said.
Bullard said the last four consumer price inflation reports have indicated that inflation “is broadening and possibly accelerating.”
He said the 7.5% annual CPI reading in January is a number “that Alan Greenspan never saw.”
Stocks
DJIA,
SPX,
were set to open lower Monday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
moved higher after Bullard’s comments and is now up 4 basis points to 1.980%
