Reporter of the Economic Business: Li Menglin Reporter of the Economic Business Business: Lan Suying
In the early morning of October 13, Beijing time, the minutes of the September FOMC released by the Federal Reserve showed that the Fed's primary goal is still to curb the continued high inflation, and in order to increase interest rates to a level that is restrictive to the US economy in the short term, but some officials have begun to worry about the risks brought by excessive hike rate .
“Many participants stressed that the cost of taking too little action in suppressing inflation outweighed the cost of taking too much action,” the minutes said. Many officials stressed that the path to rate hikes will be maintained even in the case of a slowdown in the labor market, and it is necessary to maintain restricted interest rate levels for "a period of time".
Morgan Stanley (MS, stock price of $76.60, market value of $131.509 billion), chief U.S. economist Ellen Zentner said in a research report that the minutes of the meeting showed that the Fed may continue to raise interest rates by 75 basis points at its policy meeting from November 1 to 2. "The minutes of the meeting reiterate the stance of adhering to the radical tightening of monetary policy and will maintain high interest rates for longer, although the risk of excessive tightening has been taken into consideration," Ellen Zentner said.
The Federal Reserve has raised interest rates five times this year, raising the federal funds rate to the range of 3% to 3.25%. In the last three policy meetings, the Federal Reserve has raised interest rates by 75 basis points three times in a row.
html September minutes show that almost all Fed officials attending the meeting are expected to raise interest rates sharply in the remaining two policy meetings this year, but the rate hikes in December may be reduced and may end in February or March next year.According to the latest data from CME FedWatch, traders bet on a 75 basis point rate hike in November is 84.8%, and 61.4% bet on a 50 basis point rate hike in December.
Image source: CME Official Website
"Several participants pointed out that it is very important to pay attention to tightening the pace of policies to mitigate the risks of significant adverse impacts on the economic outlook, especially in the current highly uncertain global economic and financial environment," the minutes of the meeting stated.
On October 10, the Federal Reserve's "second-in-command" Brainard warned of the risk of rate hikes too quickly, saying that Fed officials should have time to study the impact of rate hikes on the entire economy. Although Brainard's speech did not directly oppose the market's already expected rate hike, it has shown an attitude of opposing further radical rate hikes.
The minutes of the meeting show that officials in the Bundesliga Fed also support Renard's attitude, said Julia Coronado, founder of MacroPolicy Perspectives, an American economic research firm. She said that starting in December, the Fed may begin to pay more attention to market pressure or signs of worsening U.S. economy.
However, Fed Director Waller said last week that the upcoming CPI data to be released on October 14 will not have a significant impact on the November policy meeting, as inflation levels are still far above the Fed's 2% control target. But he said that as the rate hike was 75 basis points in November, the Fed will also begin to discuss adjusting its interest rate hike.
After the minutes of the Federal Reserve meeting were announced, US stocks fluctuated, US bonds yield continued to decline, and the US dollar did not change much. At the close of the market, the S&P 500 index fell 0.08% to 3577.03 points; the Nasdaq index fell 0.09% to 10417.10 points; the Dow Jones Index fell 0.10% to 29210.85 points. Both the S&P 500 and the Nasdaq both recorded six consecutive declines.
Image source: Futuniu Niu website screenshot
On the same day the Federal Reserve released the minutes of the meeting, U.S. Treasury Secretary Janet Yellen said after attending the annual Treasury Secretary and Central Bank Governors' meeting that the Treasury Department is working hard to support the US Treasury market, and she is worried that the US Treasury market will lack sufficient liquidity.
Yelen said that the balance sheet capacity of market makers engaged in U.S. Treasury bond trading has not expanded much, while the overall supply of U.S. Treasury bonds is rising.
Bloomberg said data shows that the outstanding U.S. Treasury bonds have increased by about $7 trillion since the end of 2019. However, due to regulatory requirements such as supplementing leverage ratio , large financial institutions are not willing to act as market makers.
Yellen pointed out that the Fed now has a permanent repurchase mechanism that can provide liquidity support to the U.S. Treasury market, which “may help.”
Daily Economic News
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