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The Fed: Fed’s Bullard says inflation risks won’t be clear until later this year

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Inflation is the No. 1 worry in the economy, but the picture about price pressure will be cloudy for most of this year, a top Federal Reserve official said Monday.

“We’re in a period of a lot of uncertainty around inflation. The dust has to settle a little bit before we’ll find out where inflation really is and that probably happens later this year,” St. Louis Fed President James Bullard said, in an interview on Bloomberg Television.

Bullard said there are anecdotal reports about supply chain bottlenecks and certain prices are rising fast.

The Labor Department will release its consumer price index for March on Tuesday. Last week, the producer price index had the largest annual gain since 2011. The CPI is expected to see a large gain because any increase in inflation last month is compared with the drop in prices a year ago when the pandemic struck the economy.

“It’s going to be hard to interpret it no matter how you cut it,” Bullard said.

Fed Chairman Jerome Powell has said any spike in inflation this year is likely to be “transitory.”

In an interview on CBS News “60 Minutes,” Powell said the Fed can wait to see inflation in this recovery — as opposed to prior policy, in which the Fed would move rates up in anticipation of inflation pressures.

There is a divide within the Fed, however.

Former New York Fed President William Dudley said Monday that this new strategy raises the risk the Fed will be “late.”

If the central bank delays ending its easy policy stance, there is a risk the Fed will have to raise rates sharply to keep inflation from continuing to rise and that would increase the chances of a recession, Dudley said.

Stocks were lower Monday with the Dow Jones Industrial Average
DJIA,
-0.28%

down 53 points.

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