Philadelphia Federal Reserve Bank President Patrick Harker and Fed Governor Lisa Cook expressed a hawkish tone on Thursday (20th), both of which believed that inflation is still hot and it is necessary to continue raising interest rates to cool down. Among them, Harker predicted that interest rates could rise well above 4% this year.
Harker is a voting member of the Federal Open Market Committee (FOMC) next year. He is disappointed with the recent results of the Fed’s aggressive interest rate hikes. He believes that there is no progress in fighting inflation. It is expected that interest rates may be well above 4% by the end of this year.
Cook, meanwhile, shares Harker’s stance on the need to step up to fight inflation. “Monetary policy must be based on whether inflation data actually declines, not just forecasts,” Cook said. “So policy should remain focused on restoring price stability, while also building on a strong labor market.”
They also all agree that the Fed will stop raising rates sometime next year, hold rates in a restrictive range for a while to allow monetary policy to work, and watch the week of rate hikes affect the economic environment.
Harker predicts that the unemployment rate will rise to 4.5% next year and fall to 4% in 2024. In terms of inflation, he believes that the personal consumption expenditures price index (PCE) will reach around 6% this year and drop to 4% next year. 2.5% in 2024.
Market Reaction
After Harker and Cook continued to speak, the major U.S. stock indexes turned around and fell during the session. Before the deadline, the Dow Jones Industrial Average fell nearly 70 points or nearly 0.2%, and the Nasdaq Composite Index fell nearly 70 points or nearly 0.6%. The S&P 500 rose nearly 0.7%, while the Philadelphia Semiconductor index rose nearly 0.5%. U.S. 10-year Treasury yields rose to 4.216 percent and the dollar fell to 112.720.
According to the CME FedWatch Tool, the U.S. federal funds rate futures market estimates that the Fed will raise interest rates by 2 yards (50 basis points) in November at a 0.1% chance and a 3 yards (75 basis points) chance of a rate hike. 99.9%.
