• The Federal Reserve signals the likelihood of another 0.5%p interest rate hike in September
    2022-06-20 hit 488

    Lael Brainard, the Vice Chair of the Federal Reserve (Fed) mentioned on June 2 (local time) regarding measures expected to be taken after implementing consecutive 0.5%p interest rate hikes over three occasions until next month. She announced that interest rate hikes at current pace is expected continue into September.

    The Vice Chair had an interview with CNBC the same day and mentioned it is appropriate for the Federal Open Market Committee (FOMC) to announce a 50bp interest rate hike in the future over multiple occasions and forecasted there will be no specific grounds not to implement a rate hike in September. She stressed, “It is acceptable that a forecast of 50bp interest rate hikes in June and July is already reflected in the market.” The Fed decided to abandon its zero-interest rate policy in March this year and took a measure to raise interest rate by 0.5%p for the first time in 22 years.

    As Gerome Powell, the Chair of the Federal Reserve signalled consecutive 0.5%p interest rate hikes over three occasions in June and July, the upcoming FOMC meeting to take place in September is earning greater attention by the market. Although the Vice Chair of the Fed said the situation in September cannot be fully predicted, she mentioned, “It remains a high possibility that decisions will be made to raise interest rate at current pace at subsequent FOMC meetings if monthly inflation target is met” and added, “A lot of work remains to be done to suppress inflation below 2%, which is our inflation target.”

    Additionally, the Vice Chair mentioned positive signs of implementing rate hikes are becoming evident, including a rise in house loan interest rates, but added that it is not certain whether the rise in consumer prices has peaked. She also announced her expectations regarding quantitative tightening (QT), which started this month by saying, “The process of consolidating held assets is expected to have an effect equivalent to raising interest rate over two to three occasions.” However, when asked about the risk of an economic slowdown triggered by a faster-than-expected scaling down of financial easing, she responded, “Immediate actions will be taken should we detect signs of downside pressure on the economy”

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