According to Federal Reserve Bank of St. Louis President James Bullard, four rate hikes in 2022 now appear to be on the table and, in the face of high inflation, a rate hike in March seems likely. The labour market is as tight as anyone has ever seen it, Bullard added in a interview with the WSJ, adding that the unemployment rate may fall below 3.0% this year. 

Additional Takeaways: 

"Rate hikes should be accompanied by balance sheet reductions."

"High inflation necessitates policy tightening sooner rather than later."

"The majority of what is driving inflation right now is demand."

"I expect inflation to ebb to 3.0% annualised by the end of 2022."

"Liquidity in 2021 may be eliminated with minimal disruption."

"An earlier start to rate hikes could help the Fed avoid a more hawkish rate path."

"Fed's asset purchases in 2021 were more than the economy required."

"The Fed's pandemic aid is a driver of the present level of inflation."

"The monetary and fiscal assistance provided in response to the pandemic may have been excessive."

"Fed should have stopped purchasing assets sooner than it is right now". 

Market Reaction

Hawkish commentary from Bullar have done little to stem what has been a severe tide of dollar selling on Wednesday, with the DXY still trading underneath the 95.00 level and eyeing a test of support in the 94.50s.