Fed officials continue to ignore the financial market turmoil and emphasize that fighting inflation is the top priority. Max Mester, president of Cleveland Fed, said on Monday that the fluctuation of financial market may affect investors' decision-making, and the value of the dollar will indeed affect the US economy, but their primary task is still to restore price stability. Brad and other Fed officials reiterated their position yesterday.
Brad's continued commitment to reduce the inflation rate to 2% of the Fed was widely endorsed by Chicago Fed President Charles Vance and Minneapolis Fed President Casca. They said that the Fed should be able to achieve their predicted interest rate hike path, and then maintain a high interest rate level for a period of time to curb price pressure.
The remarks made by Fed officials mainly continued the information revealed by Federal Reserve Chairman Paul last week, that is, despite the pain of the US economy, they will not back down in dealing with inflation. This hawkish stance has disrupted financial markets and led to a sharp rise in bond yields. The S&P 500 index quickly turned down and finally closed down 0.2 1%.
Brad, the "Eagle King", once again made a heavy voice: it needs to be maintained at a higher interest rate level for some time.
On September 2 1 day, Fed officials raised interest rates by 75 basis points for three consecutive times during the year, and raised the benchmark federal funds interest rate range to 3%-3.25%. The median forecast shows that officials expect interest rates to reach 4.4% by the end of this year and 4.6% in 2023. In FOMC's latest interest rate bitmap, this change is more drastic than market expectation.
Brad said that interest rates may need to rise to the "4.5% range", which is about 65,438+0 percentage points higher than his forecast in April. He quoted the latest forecast of the policy Committee, according to John? The policy interest rate suggested by the revised Taylor rule formulated by Professor john tyler.
Brad said: "We have now reached the point where we can think that we are in a restricted field." When talking about the interest rate path in the Fed's bitmap, he said, "I think we need to maintain a high interest rate level for some time to ensure that the inflation problem is under control."
Fed officials hinted that according to their median forecast, they expected the Fed to raise interest rates again by 65,438+0.25 percentage points at the last two policy meetings in June and February this year. According to the futures contract price, investors now expect that the meeting in June 165438+ 10/-2 will raise interest rates by 75 basis points for the fourth time in a row. According to the FedWatch tool of Shang Zhi Research Institute, at present, the market expects that the probability of the Fed raising interest rates by 75 basis points in June 1 1 is 55.5%, and the probability of raising interest rates by 50 basis points is 47.5%.
Brad said that the United States is facing the risk of economic recession, but he played down the threat that the yield curve of financial markets is upside down (the yield of short-term US bonds is higher than that of long-term US bonds). He said: "Based on the nominal outlook, you might expect the yield curve to be upside down, not necessarily based on the forecast of recession." "Encouragingly, inflation expectations are in the right place."
Brad: It's not appropriate compared with the Volcker era.
Although many critics of the Federal Reserve, including former New York Federal Reserve Chairman Dudley, collectively criticized the Fed for not revealing to the American people the degree of pain needed to reduce inflation, Brad disagreed with this view. He believes that the current situation is not very similar to that of the 1970s. He said that the market's pricing of the Fed's intentions means that the policy has been tightened long before the actual interest rate hike, which is different from the Fed under the leadership of Volcker.
He said: "I think this means that we have a greater chance of success." "Therefore, I don't think it is appropriate to make a strict comparison with the Volcker era at this important moment." Volcker era means that under the leadership of former Federal Reserve Chairman Volcker, the Federal Reserve raised the interest rate to a record level (close to 20%) during the period of 1979- 198 1 in order to cope with inflation and lead to the American economic recession.
Brad stressed that critics of the Fed also base their expectations on the Phillips curve relationship between rising unemployment rate and falling inflation, which has been ineffective in recent years. Instead, inflation should start to decline by lowering inflation expectations. Brad said: "Compared with the Volcker era, we have a better chance to succeed with less economic intervention."
Instead, he quoted Allen? The Fed's austerity policy led by Greenspan, with interest rates rising by 3 percentage points, has no experience of recession, and laid a glorious period in the second half of the 1990s. "So I hope we can get similar performance here." Brad said.
There are pigeons in the eagle: some officials worry that the Fed's interest rate hike path is too radical.
Other Fed officials are basically unanimous in calling for tightening policies, and making curbing inflation, the highest point in nearly 40 years, the top priority. Earlier yesterday, Evans said in an interview with the American Consumer News and Business Channel that he was inclined to continue to raise interest rates, but he also said that he might see the peak of interest rates around March next year, and then he would suspend any interest rate increase measures, and then he might even cut interest rates.
In an online interview with the media, NeelKashkari said that the Fed should continue to tighten monetary policy until it sees strong evidence of the decline in core inflation rate, and then "be patient". At the same time, he also admitted that the Fed may face the risk of being too aggressive.
"Many austerity measures are in the pipeline. We are committed to restoring price stability, but we also recognize that there is a risk of excessive tightening considering these lagging factors. " When asked if there is any reason to further raise interest rates by 65,438+000 basis points, Casca said: "The pace we are taking now is appropriate."