Two Federal Reserve (Fed) officials “attacked the eagle’s claws” on Monday (9th), reiterating that they will not let go of raising interest rates until inflation is under control, supporting the terminal interest rate to break through 5%, and then suspending it for a period of time.
Atlanta Fed President Raphael Bostic said on Monday the central bank should raise the end-point rate above 5 percent by the beginning of the second quarter and then “hold the pat on the back foot” for a longer period of time.
“We must insist that the Fed is committed to addressing high inflation, so it is necessary to raise the terminal rate to 5% to 5.25% to eliminate excess economic demand,” Postik said.
On the same day, Mary Daly, president of the Federal Reserve Bank of San Francisco, also mentioned that it is still too early for the Federal Reserve to announce its victory over inflation. She expects the terminal interest rate to be adjusted above 5%.
The Federal Reserve will hold the next Federal Open Market Committee (FOMC) meeting on January 31 and February 1. Regarding the rate hike rate, Postik believes: “After the evidence shows that wage growth has slowed, if this Thursday The U.S. Consumer Price Index (CPI) pointed to cooling inflation, which would strengthen the case for the Fed to cut interest rates to 1 yard.”
Daly judged: “Whether it is to raise interest rates by 2 yards or 1 yard, it will depend on recent data. A slower pace of interest rate hikes will allow the Fed more time to observe the data and then respond.”
The two officials do not have voting rights on the Federal Open Market Committee (FOMC) this year.
Tom Lee, co-founder of Fundstrat Global Advisers, pointed out: “The Fed wants to keep financial conditions tight, and the dollar, the stock market, the bond market sentiment, everything is easing, so they may be a little bit concerned, they want to make sure that inflation has really peaked, especially Inflation has been low since October last year.”
Jim Caron, chief fixed income strategist at Morgan Stanley, pointed out that although Fed officials now expect to raise interest rates above 5% next year, traders are still underestimating the situation. The market is currently predicting that the Fed will only raise interest rates by regarding 2 yards before the May meeting, and then cut interest rates by 2 yards by the end of 2023.
