President of the Federal Reserve Bank of St. Louis, James Bullardmade hawkish comments in an exclusive interview with Reuters on Tuesday, saying interest rates should rise to a range of 5.5% to 5.75%.

Here are the key takeaways from Bullard’s interview:

• Bullard still envisions a sufficiently tight policy rate in the 5.50% to 5.75% range.
• Interest rates must continue to rise as there is no tangible progress on inflation.
• Bullard said he felt that “the bias would be higher for longer” to get inflation under full control.
• Forecasts of a US economic recession neglect the strength of the job market and pandemic savings must continue to be used.
• The likelihood of a widespread bank stress appears to have receded, but officials are closely monitoring the situation.
• At the next meeting, the Fed should refrain from clear forward guidance and instead keep alternatives open.

Also read: The Greenback’s Dissolution: Is The US Dollar’s Reign Nearing Its End While It’s On The Brink Of A Stunning Drop To 100?

Market Reactions:

According to CME Group’s Fedwatch tool, Fed futures contracts currently assign an 88% probability of a 25 basis point hike at the May FOMC meeting.

A rate hike to 5.25-5.5% in June is currently priced in at a 23% probability, while a hold at 5-5.25% is priced in at a 67% probability.

Rate cut bets for the July FOMC meeting have been reduced further, with speculators now only having a 25% chance of the Fed funds rate returning to its current 4.75-5% range and a 3% chance of falling back to Rate 4.5-4.75%.

US 2-year Treasury yields held steady at 4.18% after rising 22 basis points in the last two sessions.

The iShares 20+ Year Treasury Bond ETF TLT up 0.33% on the day after falling 2.4% in the past five sessions.

Continue reading: Goldman Sachs posts mixed Q1 performance, Investment Banking falls 26%, sees net gain on provision for loan losses

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