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The Fed vote this year: interest rates will not fall next year, restrictive interest rates should remain for a while
Article source: Wall Street News
After the Fed raised interest rates aggressively, Cleveland Fed President Loretta Mester (Loretta Mester), who holds the voting power of the FOMC on the Fed’s Monetary Policy Committee this year, expressed hawkish views once more.
On Monday on the 26th, EDT, Mester said that the Fed’s policy rate will not fall back in 2023. Clearly the Fed needs to keep raising interest rates to curb rising inflation.
Mester believes that the need for a crackdownQualcommIn order to avoid uncontrolled inflation expectations, interest rate policy with a restrictive impact on the economy should be maintained for longer. she says:
“While the pace of (monetary) tightening has been relatively rapid, given the current level of inflation and the outlook, I believe that further increases in our policy rate are needed.”
That means monetary policy “needs to be in a restrictive stance, with real rates moving into positive territory and staying there for some time,” Mester said.
Before Mester’s speech, the Fed’s meeting last week decided to raise interest rates by 75 basis points for the third time in a row, and announced following the meeting that the Fed officials expected this round of interest rate hike cycle to peak at 4.6% next year, higher than the market’s expected peak of 4.5%. . The dot plot released following the meeting also showed that most Fed officials expect that following raising interest rates in September, the Fed will need to raise interest rates by a total of 125 basis points by the end of this year. This forecast puts on the table a further 75 basis points of interest rate hikes at the next meeting in November.
Mester on Monday did not specify how many basis points she thinks more rate hikes will be needed this year, saying instead that Fed officials will work resolutely to bring inflation back to their target of 2 percent. She wants to see inflation cool for several months before deciding it has peaked. she says:
“High inflation proves to be more persistent, requiring more restrictive policies, and (restrictive policies) to last longer, to ensure that inflation expectations do not rise and inflation falls.”
Earlier on Monday, Boston Fed President Collins, who also votes at the FOMC meeting this year, said U.S. inflation may have been near or reached its peak. Collins believes that the Fed needs to continue to tighten the currency if it is to suppress high inflation, which does lead to increased unemployment, but does not necessarily trigger a recession.
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Responsible editor: Li Yuan