Fed may put weight on February data

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WASHINGTON – US Federal Reserve officials continued sparring over how aggressively to begin upcoming interest rate increases at their March meeting, with a final inflation reading just ahead of the two-day session taking on potentially outsized importance.

St. Louis Federal Reserve President James Bullard on Monday reiterated calls for a faster pace of Fed interest rate hikes, saying that four strong inflation reports in a row warranted more aggressive action and that the central bank needed to “ratify” market expectations about its upcoming moves.

Bullard, who himself helped shape those expectations with calls last week for a 50 basis point increase at the Fed’s March meeting, said on CNBC that the Fed’s “credibility is on the line” in its quest to bring inflation down from the current 40-year high of more than 7 percent.

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“It was really October, November, December, January that called into question any idea that this inflation was naturally going to moderate in any reasonable time frame without the Fed taking action,” said Bullard, again calling for a full percentage point of Fed rate increases by July 1. That implies at least one hike of a half percentage point at one of the three meetings between now and then instead of the quarter point increases that the Fed has used in recent years.

As he spoke bond yields again rose and recent market volatility continued. The 10-year Treasury rose back above 2 percent, and the Dow Jones industrial average fell more than 200 points by late morning.

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