Investing.com – Federal Reserve members made several comments today, following the release of important data today.
The US GDP recorded a positive growth of 2.6%, which is less than the expected 2.7%, but it is still in the positive range, at a time when the unemployment claims rate recorded 198 thousand, higher than the expected 196 thousand.
The most important statements of Collins and Parkin
Fed member Barkin said that not everyone should think that every banking fall means a repeat of the Lehman Brothers disaster, and Barkin revealed that he supported a rate hike of 25 basis points as a result of his view that inflationary pressures outweigh the risks of the banking system.
Barkin said that it is too early to determine the size of the impact resulting from the stresses of defaulting on the banking system, whether at the level of credit or inflation. However, he added that the Fed should be very quick in assessing the magnitude of the effects of the banking crisis on inflation.
Raise interest again?
Barkin stressed that the battle of inflation will take a long time, and that the only way to reduce inflation is to raise interest rates again.
On the other hand, Fed member Collins said that after raising rates at the next meeting, the Fed will keep interest levels high until the end of the year.
“Financial sector pressures have eased some of the Fed’s pressure to raise interest rates,” Collins said.
Collins said he supports the Fed’s recent decision to raise 25 basis points, adding that he expects the strength of the US labor market to cool off in the coming months.
How did the Fed think before the collapse of Silicon Valley?
Collins commented on the latest data: “Recent data suggests that the economy is doing better than expected.”
Collins said that the banking crisis raised the risk of future expectations being wrong, but he said that existing inflation expectations indicate the Fed’s confidence in its ability to contain inflation.
Collins considered that the pressures of salary growth are crucial to inflation, especially in the atmosphere of strong labor market.
Barkin revealed that the weekly credit card exchange rate is monitored to see if demand has weakened. Collins believes that inflation will return to 2% levels in 2025.
Regarding the risks surrounding the commercial real estate sector, Barkin said that it is a sector in which many are exposed to many risks at the present time, but everyone believes in the Fed’s ability to neutralize any major problems. Collins predicted that the banking crisis would result in many businesses shifting to a conservative approach.
Collins said that before the banking crisis, the Fed’s visions were heading towards raising interest rates to higher levels than the current one, as he revealed the existence of tendencies to raise interest rates until the September meeting before the collapse of Silicon Valley Bank.
Collins said that it is difficult to reduce inflation without increasing the unemployment rate, but it is not necessary to fall into a recession in order to achieve this goal.
The US dollar is still down by more than 0.41%, recording 101.880 against a basket of foreign currencies. At the same time, it rose by 0.67%, to trade near $2000, specifically at $1998.2, while spot contracts recorded $1980.31, up by 0.80%.
While it increased by 0.34%, by 0.03%, and the S&P 500, by 0.21%.
While it declined by 1.74%, to record $27,763.5, and fell below the levels of $28,000 again.