A senior Fed official warned that it is an “illusion” to think the Fed can reduce inflation sufficiently without raising interest rates to levels that constrain the economy.

The Fed needs to be more aggressive in its efforts to eliminate the highest inflation in 40 years, according to Fed St. Louis branch president James Bullard, as he calls for raising interest rates to levels that actively dampen economic growth.

Bullard, a voting member of the policy-making FOMC and one of its most prominent hawks, made comments that run counter to other officials who generally see a need to push rates toward “neutral” levels this year.

This is the level of interest rates that neither promotes nor constrains economic activity, and is estimated to be around 2.4%. Bullard said the Fed needs to surpass that threshold soon this year if it wants to bring inflation closer to the Fed’s long-held 2 percent target.

“I think there is some illusion in the current policy of the central bank,” Bullard told the Financial Times. “Neutral doesn’t put downward pressure on inflation. It just stops putting upward pressure on inflation.”

“We have to put downward pressure on what we believe to be a persistent component of inflation,” he added. “Staying neutral is not enough, it doesn’t look like it, because while some inflation may moderate naturally . . . part of it won’t.”

His comments follow the new inflation data This shows that consumer prices rose at an annual rate of 8.5% in March after Russia’s invasion of Ukraine caused energy and fuel costs to soar.

“Core” inflation, which strips out volatile items such as food and energy, was slightly lower than expected, but Bullard warned it won’t fall without the Fed’s concerted efforts and the U.S. is vulnerable to unforeseen shocks that could intensify further Stoke price.

“this [inflation] The report just underscores the urgency that the Fed is behind the curve and needs to act,” he said.

A separate report on Wednesday showed further evidence of expanding inflation Price paid to U.S. producers The 11.2% increase in March was the fastest pace since year-on-year growth was first calculated in 2010.

Bullard backs a 0.5 percentage point rate hike by the Fed at its next policy meeting in May urge The FOMC raised it by a quarter of a percentage point at its March meeting.

More officials are now backing the move, and the Fed is about to shrink the size of its $9 trillion balance sheet.

He said the Fed’s benchmark policy rate should be raised “significantly” after its May meeting, and supported raising the federal funds rate by 3 percentage points from the current 0.25% to 0.50% in the third quarter.

Bullard acknowledged that reaching such levels in such a short period of time would be “ideal,” but warned that the Fed’s credibility would be at stake if it did not act.

“If markets and households think the Fed isn’t going to do the right thing and control inflation, then you have to gain credibility by actually doing something to show them that you’re serious,” he said.

Bullard pointed to former Federal Reserve Chairman Paul Volcker’s decision to raise interest rates to 20% in the early 1980s, which did curb inflation but led to a sharp economic contraction that left millions unemployed. Bullard added that Volcker had no choice but to implement such a large increase “because the committee didn’t have enough credibility.”

“So far, I think we’ve maintained our credibility, but if it slips away, it will be more difficult to control inflation in the future.”

Still, Bullard said he was optimistic the Fed could cool the economy without causing a recession — as it did in 1994.