• The U.S. and E.U. highly likely to increase interest rates next month
    2023-04-25 hit 704

    The U.S. and E.U. highly likely to increase interest rates next month…

    A series of supporting comments follow


    The U.S. and E.U. highly likely to increase interest rates next month

    A series of supporting comments follow


    Inflation is still high...Economy has strength to be sustained,

    remarks FRB presidents


    “There is still a little way to go in the fight with inflation,”

    says ECB president


    In both the U.S. and E.U., there are stronger voices being raised that inflation is still too high.


    As a result, the Federal Reserve Board (FRB) and European Central Bank (ECB) are highly likely to raise interest rates next month.


    l  The economy still has strength to be sustained.

    Loretta J. Mester, President of the Federal Reserve Board of Cleveland, and John Williams, President of the Federal Reserve Board of New York, have both expressed their view that base rates should be raised.


    Recently, the problem of credit instability in the financial sector has come to the forefront, but even if interest rates are raised, the economy still has strength left to be sustained, which is why more effort should be placed on pushing down prices.


    According to Bloomberg News, on April 20 (local time) at an interview with Yahoo Finance, President Mester reaffirmed her previous position that for inflation to reach the 2% target, the FRB would have to raise base rates at least 5%.


    “The economy still has resilience towards interest rate hikes,” she said, and emphasized that her focus is on the drop in inflation.


    However, she displayed prudence by saying that she doesn’t want any decisions to be made before the May Federal Open Market Committee (FOMC).


    John Williams, President of the Federal Reserve Bank of New York, holds the position that additional measures with the FRB are necessary to take control of inflation.


    According to the Wall Street Journal, on April 19, at an event that was held after markets closed, President Williams revealed that “Inflation is still high…In order to recover price stability, we will use our monetary policy tools.”


    Lorie K. Logan, President of the Federal Reserve Bank of Dallas, also said that inflation is too high, while Governor of the Federal Reserve System Michelle Bowman revealed that the FRB is focusing on lowering inflation.


    Although not mentioned specifically, this seems to be an indication that additional interest rate hikes are necessary.

    According to CME Group, a futures trading company, investors see the likelihood of at least 80% that the Federal Reserve System will raise 0.25%p in interest rates at the meeting on the 2nd -3rd of next month.


    This year, the Federal Reserve System raised interest rates 0.25%p each at the two meetings.


    l  “Inflation, too strong compared to our target,” says Christine Lagarde.


    The President of the European Central Bank also sees it necessary to make additional interest rate hikes in order to control prices.


    President Christine Largarde of the ECB, who is at the centre in terms of political values, remarked at an event held in Paris on April 20 that “Inflation is far stronger than our target…There is still a little way left in the fight against inflation.”


    Europe’s inflation exceeds three times that of the ECB target of 2%.


    At the ECB monetary policy meeting on May 4, it is projected that interest rates will be raised 0.25%p or 0.5%p.


    In regard to whether they will reconsider the inflation target of 2%, President Lagarde said that there is no possibility of that in the near future.


    “First we much reach our target, then confirm whether the attainment was sustainable, and investigate all types of questions,” she said.


    The hawkish Klaas Knot, President of the Netherland Central Bank, argued that interest rates should continue to be raised, not only next month, but until July.


    (Provided by Yonhap News)

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