Stocks extended recent losses Friday for their worst week in months, after a Federal Reserve official said that the central bank may need to raise interest rates as early as next year, sooner than expected.

Investors are still trying to assess how soon the Fed will start to lift interest rates from their ultra-low levels and scale back its bond purchases. The head of the St. Louis branch of the Fed, James Bullard, told CNBC Friday that inflation was stronger than anticipated and that the first interest rate increase could come as soon as next year.

That's sooner than the Fed’s latest estimate of possible rate increases in 2023.

"Fed governor Jim Bullard surprised investors when he insinuated that inflation could stick around through next year and force the Fed to raise interest rates," Callie Cox, senior investment strategist at Ally Invest, said in a note.

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