Home NewsStock Market News Fed director Waller hawks support for 3 yards or more rate hikes |

Fed director Waller hawks support for 3 yards or more rate hikes |

by WOOWinvest
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Fed director Waller hawks support for 3 yards or more rate hikes |


U.S. Federal Reserve Governor Christopher Waller said on Thursday (14th) that he supports a 3-yard rate hike (75 basis points) this month, but would prefer a larger rate hike if the data allow. rate hike. After the remarks, the market has withdrawn bets on the Fed to raise interest rates by 4 yards (100 basis points).

While Waller said he supports a three-yard rate hike at the month-end meeting, he will keep an eye on economic data and be open to what the Fed should do to control inflation.

Waller said: “July’s fundamentals depend on the latest data. We will see important data on retail sales and housing ahead of the July meeting. If these data are actually stronger than expected, it will tend to be more at the July meeting. Big rate hikes, as these data suggest demand isn’t slowing fast enough to bring down inflation.”

Waller further explained that the burst CPI data in June reinforced his view that the Fed needs to raise interest rates by 3 yards, and said that for him, a 3-yard rate hike is quite large, and the neutral interest rate is 2.25%. The Fed has gone too far in raising interest rates.

Waller said the market expects the Fed to raise interest rates by a factor of 4 in July “a bit aggressively” and doesn’t want to rush into judgment based on just a CPI report.

He also mentioned that easing inflation is the Fed’s top priority right now and expects more rate hikes even after this month’s meeting, adding: “I think the Fed needs to act quickly and decisively to keep inflation going. down, and then consider the need for further non-tightening to achieve our dual mandate.”

While Waller expressed strong concerns about inflation, he was optimistic about the economy. Waller said the strength of the job market has given him confidence that the U.S. economy will not enter a recession in the first half of 2022, and that the economy will expand, and continues to have confidence in the U.S. economy.

Waller believes the economy can still achieve a “soft landing” even with the Fed tightening monetary policy.

The U.S. gross domestic product (GDP) shrank by 1.6% in the first quarter, and the Federal Reserve Bank of Atlanta predicts that the U.S. GDP will shrink by 1.2% in the second quarter, which means the U.S. economy is in recession for two consecutive quarters.

Market Reaction

Following the June consumer price index (CPI) released by the United States yesterday and the June producer price index released today, the market estimated that the probability of the Fed raising interest rates by 4 yards gradually increased.

Economists at Wall Street investment bank Nomura Securities also forecast a 4-yard rate hike in July, saying the Fed’s inflation problem has worsened, and officials will increase the pace and magnitude of rate hikes to increase their credibility in controlling inflation .

Before the deadline, according to the CME Group FedWatch tool, the market believed that the probability of a 4-yard rate hike in July was 49.9%, which was lower than that of US stocks in early trading.

(Image: CME Group FedWatch)

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