The Day at a Glance | November 17 2022

The Top

*Higher rate hikes are required to reach a restrictive level of monetary policy: James Bullard, FED St. Louis.

*Republicans officially win control of the House of Representatives with a slim majority.

*Inflation in Europe was confirmed at 10.6% annually in October.

*The ECB is discussing moderating the pace of rate increases to 50 bp next month: Bloomberg.

*Ukraine says no peace until retaking Donbas and Crimea: Zelensky.

Economic environment

Fed Members. The chief members of the Federal Reserve continued presenting their vision about the future interest rates in public events. This morning was FED St. Louis President, James Bullard, who assured that more rate hikes are needed to reach a restrictive level that allows a moderation in demand and achieves the inflation objective. For Bullard, the rate is still far from a “sufficiently restrictive” level and suggested that the rate might have to pose between 5% and 7% to control inflation, according to various models of the Taylor rule. Bullard is one of the members that historically has preferred a more aggressive and assertive monetary policy, over more patient stances. He recognized that higher increases could bring bouts of financial stress, but if announced early and clearly, there could be an orderly transition to a higher-rate environment. He considered that the current monetary policy has not impacted significantly on inflation, but in 2023 he would expect to see a more important effect and a fall in inflation. In his comments, Bullard did not refer to the December FED decision nor did clarify his stance regarding an increase of 50 or 75 bps. His colleagues – particularly VP Lael Brainard – signaled a likely dovishness to 50 bps. Loretta Mester (FED Cleveland) is also expected to make public comments later today.