The U.S. economy is likely to experience higher inflation than has been seen for a long time, St. Louis Federal Reserve President James Bullard said Thursday.
In a conversation with reporters following a speech by an industry group in Little Rock, Arkansas, Bullard also said that he believes the economy is going to recover “much faster” than most -some economists expect.
On inflation, Bullard said his bank has received reports of supply restrictions of various kinds that are severe and have led to a sharp rise in prices.
“The inflation quiescence that has been in the last decade may not be a good guide for what is going to happen in 2021, where I would expect prices to be more volatile, perhaps higher than we’re used to it, ”said Bullard.
U.S. Treasury yields have been rising in the past few weeks with investors expecting an economic recovery from the coronavirus pandemic to lead to higher inflation.
However, one of Bullard ‘s colleagues, Charles Evans, president of the Chicago Fed, is far more optimistic that inflation will move higher.
Evans recently said it will take “years” to get inflation to an average of 2%, which is the Fed’s target.
In comments to reporters Thursday, Evans was skeptical that inflation would rise earlier.
“We need to experience inflation before I can feel confident that things are changing dramatically,” Evans said. “Show me inflation. We need to see, ”he said.
The latest Federal Reserve forecast basically sees the economic recovery take three years, but many forecasters, including some Fed officials who worrying the economy is falling in the current quarter.
See: Fed’s Harker is seeing a ‘major slowdown’ in the US economy in the first three months of the year
However, Bullard said he expects fourth quarter 2020 GDP growth to be stronger than expected and this will continue into this year.
Bullard said he believes families have saved a decent amount of money last year and will be able to keep the tide in the first few months of this year.
“So I think we’ll be fine through the first quarter and then from there, we’ll see how the vaccines can limit the health crisis,” he said. Bullard said he plans to successfully introduce the vaccines.
“I think things are going better than usual and the recovery will happen a little faster than most analysts think,” said Bullard.
The president of St. Louis Fed that it was too early to consider when the Fed might start tapering its asset purchase program.
The Fed has told the market that it will continue to buy $ 120 billion of Treasurys and mortgage-backed securities to see “significant progress” toward its goal of full earnings and 2% inflation.
Bullard said there is a lot of uncertainty about the outlook for the economy as a result of the pandemic.
“It would be inappropriate to tie matters to a specific date,” Bullard said.
U.S. stocks were higher Thursday as investors chewed some new economic data and Congress ’confirmation of President Joe Biden’s election. Dow Jones industrial average DJIA,
it went up 202 in mid-afternoon trading.