The Fed may need to raise interest rates to 9%.

A day after a Fed official acknowledged that interest rates may need to rise to 7%, analysts reached an even more surprising conclusion that “even 7% wouldn’t be high enough to win the battle against inflation”.

In a presentation Thursday in Louisville, Kentucky, St. Louis Fed President James Bullard estimated that a target of 5-7% for the federal funds rate is needed to move borrowing costs into an area sufficient to slow economic growth and production.

In the wake of those estimates on Thursday, it suffered US stocks from their first consecutive losses in two weeksMany parts of the Treasury curve showed worrying signs about the economic outlook.

But investors took Bullard’s views with a grain of salt, as the bond market steadied alongside the dollar early Friday until comments from a second Fed official, Susan Collins, led to an afternoon sell-off in government debt.

Meanwhile, optimism returned to stocks, as all Wall Street indices closed higher on Friday.

Behind the scenes, some economists praised Bullard for his honesty, while other analysts said his estimates weren’t as “shocking” as investors and traders might think.

According to what Market Watch quoted traders, money managers and economists as saying: “One of the most underestimated risks in financial markets is that inflation fails to fall back to 2% quickly enough to mitigate the need for more aggressive moves by the Federal Reserve.”

Lindsey Bigza and Lauren Henderson, analysts at Stifel, Nicholas & Co, said in a note that interest rates need to rise between 8% and 9%, from the current level of 3.75% and 4%.

The report indicated that the recent improvement in inflation pressures that have shifted from peak levels made some investors ignore the need for the Federal Reserve to continue raising interest rates.

However, standard interpretations of the so-called “Taylor Rule” estimate suggest that the federal funds rate should be around 10%, according to UniCredit researchers.

Taylor’s rule refers to the generally accepted rule of thumb used to determine where interest rates should be in proportion to the current state of the economy.

Some have publicly questioned the estimates provided by Bullard, a voting member of the FOMC this year, pointing out that the policy maker omitted the effects of the Fed’s quantitative tightening from his rate estimates.

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