Atlanta Federal Reserve Bank President Raphael Bostic said in an interview with the Financial Times a few days ago that if inflation remains high, the US Federal Reserve (Fed) may extend the rate hike to 0.5 percentage points (2 yards). ).
Bostic holds a hawkish view, believing that there should be 3 rate hikes in 2020, 25 basis points (1 yard) each time, the first rate hike will be in March, and if economic data proves necessary in the consolidated table, it may be Take more aggressive measures.
His remarks mean the Fed is likely to raise rates at the remaining seven interest rate meetings in 2022, possibly even raising the federal funds rate by half a percentage point, which is double its normal level.
“If the data show that the situation has developed to a point where a 50 basis point rate hike is needed or ‘will’ be appropriate, then I would lean towards that view…if rates are raised,” Postik said on Friday. Makes sense in the next meeting, I can accept it. “
He added that when considering interest rate forecasts, it is also closely watched whether the monthly increase in the consumer price index (CPI) slows down, and whether there is further evidence that rising wages are not having a material boost to inflation, He pointed to the latest Employment Cost Index (ECI) report on Friday, which was encouraging, and that wage growth is expected to moderate going forward. The ECI rose 1% in the fourth quarter of last year, below expectations for a 1.2% rise and down from a 1.3% rise in the third quarter.
Postik’s remarks echo those of Fed Chairman Powell, who said this week that he would not rule out taking the strongest possible policy measures to curb inflation, which is currently at a 40-year pace in the U.S. highest point.
Powell has said that the Fed will remain “humble and flexible,” meaning the Fed’s policy is “gradually moving away” from the ultra-easy monetary policy implemented in 2020 due to the impact of the epidemic.
As a result, previous market estimates have also changed, with traders now pricing in another 25 basis points (1 yards) of rate hikes this year, for a total of 5 basis points (5 yards).
In addition, the Fed’s hawkish stance has unnerved global markets, leading to extreme volatility this month and a sharp drop in U.S. stocks. However, Bostic is not worried, believing that this is a natural reaction for the Fed to start withdrawing support measures, while also refuting the Fed’s interest rate hike. The argument that the rate is too large and the way of raising interest rates will hurt the economy, believes that even if the interest rate is raised three times, the policy is still in a very loose space, and economic growth will not be too limited.
Bostic backs Fed to cut its 9 trillion ‘as soon as possible’ without compromising market functioningDollar‘s balance sheet and remains “optimistic” about the performance of the U.S. economy in the coming months despite rising inflation.