Nick Timiraos, a Wall Street Journal reporter who is widely recognized by the market as the “Federal Fed’s microphone”, revealed on Monday (19th) that Fed Chairman Powell had revised his speech at the annual meeting of global central banks, shattering the market’s expectations for the Fed to turn pigeons.
The previous market expectations of the Fed’s dovish turn led to a strong rebound in US stocks from the lows in June. The S&P soared 17% from mid-June to mid-August, the strongest performance since 1951.
“I suspect Powell isn’t happy regarding the market situation following the Fed’s July meeting,” said William English, a former Fed economist who is now a professor at the Yale School of Management, Timiraos said in the report.
Timiraos also quoted sources as saying that Powell “rewritten” the speech at the “Jackson Hall” annual meeting of global central banks, using unusually short length to send a simple message thatThe Fed must insist on raising interest rates while allowing the economy to enter a recession.
Financial markets have praised the legendary Paul Volcker for fighting back hyperinflation in the United States during his tenure as Fed chairman in 1980, and Chairman Powell also took the lead at the annual meeting of global central banks, emphasizing that The Fed wants to avoid repeating the mistakes of the 1970s and 1980s.
“We have to hold on until the job of containing inflation is done,” Powell said at the annual meeting. “It may take some time for the Fed to keep rates at restrictive levels.”
Powell’s strong warning once morest premature easing of policy directly poured cold water on the market’s dovish hopes. He praised Walker not for his precise tactics, but for his courage to do what he thought was right, and Ball said: “If you read his last autobiography, you really understand.”
Powell also repeated the hawks’ determination to raise interest rates following the annual meeting. In his speech at the Cato Institute, a Washington think tank on the 8th of this month, he reiterated:“The central bank will not back down until it has completed its task of fighting inflation. History has taught us not to ease tightening too early, and the Fed will not back down when it fails its mission.”
Timiraos noted that the end of the Fed’s current rate hike cycle remains highly uncertain, in part because the outlook for inflation is also fraught with uncertainty, but to be sure, officials have previously made clear their willingness to tolerate recession and will “Unconditionally” reduce high inflation to avoid worse consequences in the future.
The Fed is regarding to release the conclusion of its interest rate decision-making meeting at 2:00 a.m. on September 22, Taiwan time. Reports disclosed by the Fed’s microphone during the pre-meeting silence period more than once show that it is a foregone conclusion that the Fed will raise interest rates by at least 3 yards this week. The probability of continued substantial interest rate hikes in the future increases.
Traders forecast a more than 80 percent chance of the Fed raising rates by three yards this week, according to CME’s FedWatch tool.