Following the U.S. inflation data report in June, the market has worried that the Federal Reserve (Fed) will raise interest rates by 4 yards (100 basis points) to stabilize inflation, but officials have come out one after another to appease the market. 15) Fed hawk James Bullard and dove Raphael Bostic expressed their positions in different fields, suggesting that the next rate hike of 3 yards (75 basis points) is enough.
Atlanta Fed President Bostic said he was cautious about a big rate hike (4 yards), while St. Louis Fed President Bullard said he would delay making a judgment until this month’s monetary policy meeting.
Bullard remains in favor of raising interest rates higher than previously expected by the end of the year, and he said Friday at a virtual conference hosted by the European Economic and Financial Center that the Fed should probably raise its benchmark rate to a range of 3.75% to 4% by the end of the year. range instead of 3.5%. That means, at current levels, the Fed will raise rates by 255 basis points this year.
As for the meeting at the end of the month and the rate of interest rate hikes in the future, Bullard said that inflation may fall to 2% in the next 18 months, and advocated an early rate hike, but there may be no difference between 3 yards or 4 yards of interest rate hikes now.
Meanwhile, Bostic said in remarks on Friday that current inflation is too high but the Fed will keep it under control, but he signaled his disapproval of a 4-yard rate hike at the end of the month. He believes that the Fed wants policy action in an orderly manner, and the 3-yard rate hike has been quite large compared with past experience.
Today’s talk between the two officials once again cooled the market’s expectations for a rate hike of 4 yards at the end of the month meeting. According to the CME Group FedWatch tool, the probability of the Fed raising interest rates by 4 yards at the end of July meeting has dropped to 30.9%, while the probability of raising interest rates by 3 yards at the end of July has dropped to 30.9%. The probability rose to 69.1%.