In view of the slow and bumpy progress in reducing inflation in the United States and the fact that the U.S. economy is still strong, more and more Federal Reserve officials are beginning to send similar signals to the outside world: there is no rush to cut interest rates now.
On Thursday Eastern Time, many Federal Reserve officials sent clearer signals, which also made the market increasingly worried about the prospect of future interest rate cuts.
Many officials from the Federal Reserve issued hawkish warnings one after another
On Thursday Eastern Time, John Williams, the "third in command" of the Federal Reserve and President of the Federal Reserve Bank of New York, once again expressed the view that "there is no rush to cut interest rates now," causing U.S. bond yields to rise and U.S. stocks to fall.
Then, two other hawks in the Federal Reserve: Atlanta Fed President Bostic and Minneapolis Fed President Neel Kashkari released more powerful "hawk" sounds to the outside world.
Atlanta Fed President Bostic has stated many times before that he expects to cut interest rates only once this year. In a speech on Thursday, he reiterated that view, saying his view on the likely timing of a first rate cut was "at the end of the year" and saying "I'm willing to be patient."
Bostic said he still believes inflation is moving toward the central bank's 2% target, but that the process may be slower than people expect:
"Inflation is high - too high - and we need to get it to the 2% target... I'm happy to be patient."
Bostick is this year's voting committee member. He pointed out: "Our current stance - which I think is a restrictive stance - will slow the economy and ultimately get us to 2% inflation. But I would not rush forward in this process. "
Compared with Bostic’s expectation of one interest rate cut this year, “Eagle King” Kashkari’s view is more radical. He directly stood up for "no interest rate cut" during the year.
Kashkari is not a voting member this year. He said he also wanted to remain "patient" and that the first rate cut might not be appropriate until next year.
Asked whether it would be appropriate to keep interest rates steady this year given the unexpected rise in recent inflation data, Kashkari said it was "possible."
"I think we need to wait and see and be patient as long as necessary until we are confident that inflation is coming back down to 2 percent," he said.
More and more people are talking about raising interest rates
It is worth noting that more and more Federal Reserve officials have recently talked about the prospect of raising interest rates.
Williams said on Thursday that while raising interest rates was not his "baseline scenario," it was possible if economic data justified such action.
Bostic also mentioned raising interest rates in his speech:
"Controlling inflation is critical... I would have to be open to raising rates if inflation comes back down and stalls or goes in the opposite direction."
The market has begun to worry that interest rates will not be cut within the year
Just a few weeks ago, many Fed officials were not so hawkish. Faced with the Federal Reserve's tightening monetary policy, they expected that U.S. inflation would be cooled, making it necessary to cut interest rates multiple times before the end of the year to prevent an excessive slowdown in the economy.
However, the economic data in recent weeks have clearly made them feel a bit "slapped": the U.S. CPI has risen more than expected for three consecutive months, and other economic indicators also show that U.S. retail spending is booming and the job market is strong, which makes them increasingly Downplayed expectations of a near-term interest rate cut.
With the quiet change in the Fed's remarks, financial markets have also begun to digest the reduction in the number of interest rate cuts and the postponement of interest rate cuts during the year.
Now, futures contracts settling on the Fed's policy rate reflect expectations that the first rate cut of the year will occur in September, up from expectations a few weeks ago that the first rate cut would be in June. In addition, CME's FedWatch tool shows that the market expects that the possibility of two interest rate cuts by the end of this year is only about 50%.
JPMorgan Chase President Daniel Pinto even warned on Thursday that the Federal Reserve may not cut interest rates at all this year given high inflation.
Pinto said the Fed may have to wait longer before cutting interest rates, but the possibility of raising interest rates is very, very low. He doesn’t think the Fed will rush into action now because cutting interest rates too soon would have painful consequences that could lead to a recession. Recent economic data shows U.S. inflation remains higher than many expected earlier this year, making a quick rate cut by the Federal Reserve less likely.
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2024-04-19
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