From St Louise Fed chair James Bullard today via Bloomie:
Federal Reserve Bank of St. Louis President James Bullard said a surprisingly fast drop in unemployment will fuel inflation, bolstering his case for an interest-rate increase early next year.
“I think we are going to overshoot here on inflation,” Bullard said today in a telephone interview from St. Louis. He predicted an inflation rate of 2.4 percent at the end of 2015, “well above” the Fed’s 2 percent target.
“That is a break from where most of the committee seems to be, which is a very slow convergence of inflation to target,” he said in a reference to the policy-making Federal Open Market Committee.
No market reaction that I can see. My own view is that the weak US unemployment internals will keep the lid on wage push inflation for some time yet and already discussed at length other sources of inflation will be “looked through”. Mid next year still looks the base case for rate rises.
