Data May Bias The Fed To More Rate Hikes, Ex-St. Louis Fed Chief Says  

• Federal Reserve officials may have to revise higher forecasts of how far they'll have to raise interest rates given the unexpected strength of the U.S. economy and still sturdy levels of underlying inflation, a former U.S. central banker said.
• James Bullard, former president of the St. Louis Fed, has been a prominent hawk at the Fed in recent years in favour of aggressive rate hikes to curb high inflation. He spoke on Wednesday after the release of consumer price index data for August that showed ongoing inflation pressures.
• Overall inflation rose 3.7% from a year ago on higher gasoline prices, while inflation stripped of food and energy items edged a 4.3% year-on-year gain, from 4.7% in July, the Labour Department reported.
• The catch, as Bullard saw it, was the monthly change in the CPI was higher in August than it was in July. Core CPI gained 0.3% versus the prior month's 0.2% increase, while the monthly rise in overall CPI was 0.6% in August, compared to July's 0.2%.
• That development was "a little bit concerning," he said, adding that Fed officials want inflation to ease rather than quicken, and the CPI data "suggested that it's not going to come down as fast as they previously thought." "That might change the sentiment toward a somewhat higher trajectory for the interest rate path than would have otherwise been expected," Bullard said.
• The Fed is widely expected to leave its benchmark overnight interest rate in the current 5.25%-5.50% range at the end of a two-day policy meeting next week. The central bank also will release updated policymaker projections for economic growth, inflation, unemployment and the federal funds rate.

(Source: Reuters)