Home NewsStock Market News Fed microphone: The central bank will raise interest rates by 3 yards next month and discuss raising interest rates slightly in December | Anue Juheng-US Stocks

Fed microphone: The central bank will raise interest rates by 3 yards next month and discuss raising interest rates slightly in December | Anue Juheng-US Stocks

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Fed microphone: The central bank will raise interest rates by 3 yards next month and discuss raising interest rates slightly in December | Anue Juheng-US Stocks


According to the “Wall Street Journal” (WSJ) report on Friday (21st), reporter Nick Timiraos, known as the “Federal Fed’s microphone”, wrote in an article that Fed officials expected to raise interest rates by 3 yards (75 basis points) at the November meeting. There may be discussions on whether and how to signal a small rate hike in December.

Timiraos also mentioned that Fed officials currently have two views. One is that they hope to slow down the pace of interest rate hikes as soon as possible, and hope to stop raising interest rates next year, observe the impact of this year’s rate hike cycle on the economic slowdown, and reduce the risk of premature interest rate cuts. One faction believes it is too early to discuss these issues, with data showing inflation remains scorching hot and widening.

A likely solution, according to Timiraos, is for Fed officials to raise interest rates by 2 yards (50 basis points) in December, while forecasting a rate hike next year that is slightly higher than last month’s forecast. The U.S. federal benchmark rate has risen to a range of 3% to 3.25% after a rate hike in September.

Investors in the interest-rate futures market now expect the Fed to raise rates to 5 percent by spring, according to CME Group data, after most Fed officials last month expected rates to rise to at least 4.6 percent next year.

If officials were considering a two-point rate hike in December, they hoped to prepare investors for the decision in the weeks following the November meeting to avoid triggering a fresh rally, the report said.

The market once believed that the Fed would slow down the pace of interest rate hikes, and US stocks rebounded in July and August due to expectations. However, this was contrary to the central bank’s goal. Therefore, Fed Chairman Powell rewrote the speech at the central bank’s annual meeting in August, quelling the market’s dovish turn hope.

Fed officials split on policy

However, Fed officials currently have different views on the future policy direction. Loretta Mester, president of the Cleveland Federal Reserve Bank and this year’s voting right on the Federal Open Market Committee (FOMC), hinted that because the effect of reducing inflation has not been seen Progress, tending to raise interest rates by 3 yards in the next two meetings.

Philadelphia Federal Bank President Patrick Harker yesterday also believed in continuing to raise interest rates to fight inflation, and even predicted that interest rates could be much higher than 5% next year.

On the other hand, the Fed’s “second-in-command” Lael Brainard and other officials were uneasy about raising interest rates by 3 yards after November, suggesting the central bank should act cautiously. At the same time, Chicago Fed President Charles Evans is worried about the risk of raising interest rates too high and wants to keep rates at a neutral level, even though the next inflation report will not be too optimistic.

Fears of a 2-yard rate hike in December

Fed policymakers now face a series of decisions: whether to raise interest rates by a modest 2 in December, and if so, how to explain to the public whether the central bank has given up on fighting inflation? The final outcome is likely to depend on Ball’s decisions as he seeks consensus.

Kathy Bostjancic, chief economist at Oxford Economics, said if officials decide to raise interest rates by two yards in December, they have reason to worry about triggering another stock market rally. The market has always wanted to see the Fed turn dove, and the Fed has to explain that a 2-yard rate hike was a meaningful decision.

Before the mid-December meeting, Fed officials have more than two months to watch economic indicators, including employment and inflation indicators, the Fed is now closely watching the Employment Cost Index (Employment Cost Index, ECI) to measure Worker salary status.

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