The Fed’s “second-in-command” Lael Brainard said on Friday (30th) that the central bank needs to keep interest rates high for a period of time to cool inflation, and must avoid premature rate cut.
Monetary policy is focused on restoring price stability in a high-inflation environment, and “the full impact of tightening financial conditions” from higher interest rates will play a role in reducing price pressures in the economy, although it will take some time, Brainard said. .
Monetary policy will need to remain in restrictive territory for some time during this time to convince the public that inflation is returning to target, and for these reasons, the Fed is committed to avoiding a premature withdrawal.
Brainard also pointed out that it is still too early to declare victory over price pressures, and the inflation rate in the United States and other countries is too high to exclude the risk of more inflation shocks in the first place.
As for the Fed’s future policy direction, she said that uncertainty is still high at present, and there are still a series of predictions regarding the appropriate interest rate range in the future. and rely on data” to act.
Global financial markets face high volatility, with the dollar surging once morest major currencies, fueling fears that the Fed’s domestic mandate might cause major problems elsewhere.
In this regard, Brainard said the Fed is closely watching how its policy actions affect the global economy, focusing on those financial vulnerabilities that are exacerbated by the emergence of more adverse shocks.
She listed areas of potential trouble in parts of the world, but did not specify whether a replacement seemed imminent or serious enough to alter the Fed’s current monetary policy path.
Market Reaction
Major U.S. stock indexes fell on fears that the Fed would raise interest rates sharply following an acceleration in the core consumer spending (PCE) price index in August. Before the deadline, before the deadline,Dow Jones Industrial Averagedown more than 50 points, or nearly 0.2%,Nasdaq Composite Indexup 50 points, or nearly 0.5%,S&P 500 Indexdown 0.05%,Philadelphia SemiconductorThe index fell nearly 0.3 percent.
U.S. Treasuries 10-year yieldfell to 3.716%,US dollar indexGold rose 0.51% to $1,677.10 an ounce, rising to 112.32.
According to the CME FedWatch Tool, the U.S. federal funds rate futures trading market estimates that the probability of the Fed raising interest rates by 3 yards in November is 58.5%, and the probability of raising interest rates by 2 yards (50 basis points) is 41.5%.
