Fed's Bullard says soft landing achievable, Daly thinks work 'far from done'

The US Federal Reserve and the European Central Bank may be able to lower inflation in an orderly fashion while achieving a relatively soft landing, a top Fed official said.

In remarks prepared for delivery at an event organised by the Money Marketeers of New York, St.Louis Fed chief, James Bullard, said that was thanks to the credibility won by central banks since the 1970s.

Bullard emphasised that the Fed was committed to its price stability mandate, noting how it had raised official interest rates "sharply" and started down the road on quantitative tightening.

The central banker also said that he drew comfort from the fact that medium-to-longer term inflation expectations were beneath shorter-term ones.

That, he said, was "suggesting markets presently expect inflation to come under control in the quarters and years ahead."

In a separate interview with CNBC, Bullard said: "I've argued now with the hotter inflation numbers in the spring, we should get to 3.75% to 4% this year.

"Exactly whether you want to do that at a particular meeting or some other meeting is a great question. I’ve liked front-loading. I think it enhances our inflation-fighting credentials."

Earlier, his peer at the Chicago Fed, Charles Evans, had made much the same points, pointing out how many forecasters, himself included, were anticipating that inflation would cool "substantially" over the next two years.

He also noted how Federal Open Market Committee members' median forecast for the target range for the Fed funds rate at the end of 2022 was 3.25-3.50% and 3.8% by the end of 2023.

That compared to a 2.25-2.50% target range at present.

Hence, he added that: "I expect it will be necessary to bring rates up a good deal more over the coming months in order to return inflation to the Committee’s 2 percent average inflation target."

Fed Governor Loretta Mester appeared to be more hawkish, reportedly telling the Washington Post that "We have more work to do because we have not seen that turn in inflation.

"It's got to be a sustained several months of evidence that inflation has first peaked - we haven't even seen that yet - and that it's moving down."

Mary Daly, the head of the San Francisco Fed, seemed to be in a similar frame of mind, saying in an interview on Linkedin: "The number of people who can't afford this week what they paid for with ease six month ago just means our work is far from done.

"My modal outlook, or the outlook I think is most likely, is really that we raise interest rates and then we hold them there for a while at whatever level we think is appropriate."