2023-10-10 23:55:12
In yet another example of dovish comments from Federal Reserve officials, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said that the Fed may not need to raise interest rates further and that monetary policy is already restrictive enough to allow inflation to return to normal. 2% target. However, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, who has a hawkish stance, said that the recent rise in long-term bond yields still has an unclear impact on the policy outlook.
Bostic said at the American Bankers Association (ABA) on Tuesday (10th): “I think our policy interest rates have reached a sufficiently restrictive level to bring inflation down to 2%. I do think we no longer need to Raise interest rates.”
He went on to add that if there are unexpected changes in the economic outlook, it may prompt officials to raise interest rates, but this is not his view at this stage. Bostic, who does not have a vote this year, is one of the most dovish among Fed officials and has long called for a halt to interest rate increases.
Three Fed officials, including Fed Vice Chairman Philip Jefferson, have said in recent days that rising U.S. bond yields may reduce the need for the Fed to further raise interest rates.10-year U.S. Treasury yieldOn Tuesday, prices fell from the 16-year mark, marking the largest one-day drop so far in August.
According to futures market pricing, investors estimate that the chance that the Fed will raise interest rates by another 1 point (25 basis points) in November is less than 20%.
Kashkari: Impact of yields on interest rate outlook remains unclear
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, who serves as a voting member this year, said on the same day that the recent rise in long-term U.S. bond yields means that the Federal Reserve (Fed) may not need to make as large a move as under other circumstances. Raise interest rates. Compared with Bostic, he is less certain regarding suspending interest rate hikes.
Kashkari said,10-year U.S. Treasury yieldThe recent softening is puzzling. One possible reason is that investors are optimistic that the U.S. economy will be stronger than originally thought in the next five to 10 years. Furthermore, this may also reflect investors’ view that the Fed will be more active in suppressing inflation. Some people blame the problem on the federal government’s massive debt issuance.
He said: “Rising long-term bond yields may do some work for us to suppress inflation, which is definitely possible. But if long-term bond yields rise, it is because investors have expectations of what we are going to do. If they change, we may have to act in accordance with their expectations in order to maintain the current yield rate.”
He said he would like to see further inflation, employment and wage data to be convinced that the Fed has done enough. He also reiterated his statement last month that there is a 60% chance that the Fed will raise interest rates once more this year and that the United States is on the road to achieving a soft landing for the economy.
Waller: Firmly defending 2% inflation target
Fed Governor Christopher Waller firmly defended the Fed’s 2% inflation target at an event on Tuesday, but the hawkish official did not say much regarding the current state of markets or monetary policy.
Although some economists and observers have recently said that raising the inflation target can alleviate the pain of defeating inflation and avoid the job losses that may result if it reaches 2%, Fed officials have reiterated that they will bring the inflation rate back to 2%. promise.
Waller emphasized on Tuesday that the Fed chose the 2% target in part because it is most consistent with the Fed’s dual mission of stabilizing prices and achieving full employment. “We have reiterated this number many times since 2012, and in the process of tightening monetary policy since the beginning of last year, we have made clear our determination to reduce inflation to 2%,” he said.
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