Atlanta Federal Reserve Bank President Raphael Bostic recently opened the door to the possibility of a pause in rate hikes in September, sparking a flurry of Wall Street analysts discussing the terms of the Federal Reserve’s pause in rate hikes.
Postik said on Monday (23rd) that after raising interest rates by 2 yards each in June and July, it should be reasonable to hold off on raising interest rates in September.His forecast may require two conditions to be met: a slowdown in economic growth and a cooling in inflation this fall, but analysts say they won’t be easy to meet.
UBS strategist Matthew Mish said the question is what market and economic conditions would prompt the Fed to pause rate hikes.
“The Fed has to be pretty confident that inflation is going down, and obviously they want to see clear and convincing evidence that inflation is cooling, but looking at the historical record, economic growth is also an important consideration, and the slowdown will have some impact,” he said. Help reduce inflationary pressures.”
Looking back at the Fed’s record 11 pauses in the rate normalization cycle since the 1960s, UBS strategists found thatThe Fed typically doesn’t pause raising rates until its target rate exceeds the annual rate of inflation, which, given the Fed’s preferred measure of inflation recently hit 6.6 percent, means prices would have to fall significantly to meet that condition.
Separately, Futures First analyst Rishi Mishra said that as the annual rate of inflation remains high, the Federal Open Market Committee (FOMC) may next look at the monthly rate of increase in the consumer price index (CPI).
Under his scenario, Fed officials may feel more reassured and more confident that they are on the right path if monthly CPI growth falls to 0.3% or less from May to August, well below March’s 1.2%.
When to act?
Bloomberg Chief U.S. Economist Anna Wong said she thinks the Fed is more likely to pause rate hikes in December than in September.
“Since the April CPI report, risks have shifted to a more hawkish path, as service sector inflation has become more widespread and too fast, and a massive deflation in the goods sector has to be offset to offset it,” she said. Inflation impact and return to the level the Fed forecast in March.”
Steven Ricchiuto, chief U.S. economist at Mizuho Securities, said:10-Year U.S. Treasury YieldThe slide could also make Fed officials comfortable with the inflation outlook. This rate is often seen as the long-term inflation forecast for the United States.
Ricchiuto said that while the Fed hopes to avoid an economic slowdown, it is necessary to pause rate hikes, with some companies already signaling that the labor market is slowing.
“The central bank is going to have a response to rising unemployment, especially if inflation starts to fall, and you’re going to start to see people coming into the job market having a harder time finding jobs, and that’s where it starts,” he said.