A Fed Official's Prediction Spooks the Stock Market

James Bullard thinks the Federal Reserve will start raising interest rates next year
By John Johnson,  Newser Staff
Posted Jun 18, 2021 10:07 AM CDT
A Fed Official's Prediction Spooks the Stock Market
In this photo provided by the New York Stock Exchange, trader Ashley Lara works on the trading floor in May.   (Nicole Pereira/New York Stock Exchange via AP)

When the Fed said earlier this week that it might start raising interest rates in 2023, the stock market wasn't happy. On Friday, when a Fed official said the hikes could come even sooner, the market's mood got even worse. In early trading, the Dow was down about 480 points, or 1.4%, while the benchmark S&P 500 was down nearly 1% and the Nasdaq about 0.5%. The steep declines have put the market on track for its worst week since January, reports the Wall Street Journal. They came after St. Louis Federal Reserve President James Bullard told CNBC that the first rate hike might happen in 2022, with rising inflation the main reason.

“We’re expecting a good year, a good reopening," said Bullard. "But this is a bigger year than we were expecting, more inflation than we were expecting. I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.” The reopening of the economy has caused prices to rise on materials from lumber to oil, explains the AP, and while the consensus is that the inflation will be temporary, part of the Fed's mandate is to make sure prices don't get out of control. (More stock market stories.)

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