in Fed hikes three times in hikes 275 basis points, and a Fed decision maker clearly stated that he supports such a super aggressive rate hike again.
On Wednesday, Eastern Time, Atlanta Fed Chairman Bostic, who had the voting rights to the Federal Reserve's Monetary Policy Committee FOMC meeting in 2024, said that the form of fighting high inflation was more severe than he expected. He supported that by the end of this year, the Federal Reserve would raise interest rates by a total of 125 basis points.
"Inflation is still high, too high, not enough to fall back to our (Fed) target of 2%. "Earlier this summer, he expected improvements in supply chain imbalances would help ease price pressures, but "that wasn't as strong as expected, and it did lead me to adjust my policy perspective."
"The lack of progress so far is much worse than I thought, and now we have to take a moderately restrictive position. In my opinion, that is to get our policy (interest rate) range to 4.25% to 4.5%. I prefer to reach this point by the end of this year."
Bostic said that given the strength of the U.S. economy and the steady and high inflation, his benchmark expectation is that the next Fed meeting in November will decide to raise interest rates by another 75 basis points, and then the last meeting in December will raise interest rates by 50 basis points. At the same time, he added that these expectations are determined by future data.
Before Bostic's speech, the recently announced Fed decision-maker's expectations showed that most of his colleagues also expected that after a sharp rate hike in September, they would continue to raise interest rates by the end of this year.
Last week's Fed meeting decided to raise interest rates by 75 basis points and announced after the meeting, the Fed's policymakers' expectation of interest rate hikes is more hawkish than the market forecast: the median expected value of Fed officials is, with interest rates reaching 4.5% by the end of this year, and next year, the interest rate peak of 4.6% in this round of interest rate hike cycle, which is higher than the market's expectations of 4.5%, and far exceeding the interest rate range of 3%-3.25% after the interest rate hike last week.
Moreover, the dot chart released after the meeting shows that most Fed officials expect that after the rate hike last week, a total of 125 basis points will be needed to raise interest rates by the end of this year. This forecast puts the possibility of another 75 basis points hike in the Fed's next November meeting. Because according to the planned schedule, the Federal Reserve only has two interest rate meetings left this year. Judging from the range of 125 basis points, one of which may have to add 75 basis points.
After the Fed meeting last Wednesday, the market's expectation of the Fed's 75 basis points rate hike in November had risen to more than 80%.
Wall Street News noticed that by Wednesday, the "Federal Observation Tool" of the Chicago Mercantile Exchange (CME) showed that the U.S. federal funds rate futures trading market predicts that the probability of the Federal Reserve hike 2 2 275 basis points in November is close to 60%, and the probability of raising 50 basis points is about 41%.
faces a lot of geopolitical uncertainty. Pay attention to the situation in the UK and other places.
During Bostic's speech, the British financial market, especially the bond market, was shocked after the announcement of a super-large tax cut plan in China.
Bostic said on Wednesday that Fed officials have not ignored the trends in other regions of the world outside the United States, such as the turmoil in the UK and the Russian-Ukrainian conflict.
"We face a lot of wider geopolitical uncertainty, so we must definitely pay attention to those things."
Bostic said that the Fed needs to pay attention to changes in the international situation, but said that the US economy and financial system have been well strengthened. The US economy still has considerable momentum. Because of its own economic strength, the US is not so sensitive to "contagion" from the outside world.
To avoid excessive tightening, interest rate hikes should be suspended when inflation drops to 2%,
At the end of May this year, Bostic had raised the view that interest rate hikes were suspended, saying that after 50 basis points each in the following two Fed meetings, it may be "meaningful" to suspend interest rate hikes in September, mainly depending on the actual situation. If inflation continues to be high, another 25 or 50 basis points may be added in September.
This Wednesday, Bostic once again mentioned the view of suspending interest rate hikes, saying that he was willing to stop hikes before inflation fell to a target of 2%.
"I think it's not appropriate for us to continue tightening and hiking interest rates until inflation reaches 2%. That will make sure we have over-action and will put the economy into a negative range."
Bostic said he still hopes that the U.S. economy can avoid recession and avoid substantial growth in unemployment. He still believes that recession is not a predetermined inevitable outcome. "We can have some weakness, but at the moment I don't think it will give us the experience of (creating) historic recession. "
The day before Bostic's speech, two other Fed officials also mentioned the risk of transitional interest rate hikes.
On Tuesday, the veteran dove and Chicago Fed Chairman Evans said that he was indeed worried about the rate hikes too quickly, but he was cautiously optimistic about avoiding recession, believing that even when the interest rate peaks in March next year, recession may still be avoided. Next year, FOMC voting committee member and Minneapolis Fed Chairman Kashkali said on the same day that the Fed's current rate hikes are appropriate. At the same time, he admitted that due to the lag of monetary policy, there is a risk of excessive interest rate hikes.
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