Forex

HAWKISH BULLARD OPENS THE DOOR TO A 75 BASIS POINT HIKE St. Louis Fed President, Jim Bullard (one of the most hawkish members of the FOMC) put a number of markets on edge yesterday when he failed to rule out a 75 basis point hike. The status quo had thus far been a 50 basis point hike but Bullard’s reminiscent comments regarding the economic environment of the early 1990’s see’s him potentially looking for a 75 basis point hike in May. In addition, Bullard mentioned his preference for interest rates to rise to 3.5% by year end, while the markets have thus far priced in around 2.5% to 2.75%. Bullard has been rather successful in convincing his fellow FOMC members to raise their urgency and magnitude of future rate hikes in the wake of persistent inflation. He began calls for a 50 basis point hike in the March meeting, which the minutes revealed, would likely have gone ahead if not for the conflict in Ukraine. Gold dropped sharply yesterday and has continued lower this morning as US treasury yields also rose in response to higher rate expectations.