Octavio Marenzi, CEO of Opimas LLC, discusses what could happen to the markets and bank stocks if the Fed hikes rates again after the June pause on ‘Warney & Co.’
chorus of federal Reserve Officials are leaving the door open for at least one more interest rate hike in the coming months amid signs of underlying inflationary pressures in the US economy.
In separate speeches and interviews this month, several policymakers delivered an aggressive message: Although they welcome the recent decline in inflation, they warn that inflation is still too high for a pause in the central bank’s tightening campaign. .
“I think we’re going to have to grind higher with the policy rate in order to put substantial downward pressure on inflation and target inflation in a timely manner,” St. Louis Federal Reserve President James Bullard said in Monday’s speech. Awarded to the American Gas Association in Florida. “I’m considering two more moves this year – exactly where they will be this year, I don’t know – but I’ve often advocated sooner rather than later.”
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Mariner S. The Eccles Federal Reserve Board Building is seen on September 19, 2022 in Washington, DC. ((Photo by Kevin Diesch/Getty Images) / Getty Images)
Investors are betting that the Fed will take a pause in raising rates after policymakers approve it at the June meeting 10th hike in MayRaising the federal funds rate to a range of 5% to 5.25%, the highest since 2007.
But sharp comments from Bullard as well as Minneapolis Fed President Neel Kashkari raised fears of an 11th rate hike in June.
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Kashkari, a voting member of this year’s policy-making Federal Open Market Committee, said Monday he is not taking future rate hikes off the table, even if officials choose to freeze an increase next month.
“I think it’s a close call right now, either, versus another extension in June or giving up,” he said during an interview with CNBC. “What’s important to me is not indicating that we’re done.”
James Bullard, President and Chief Executive Officer at the Federal Reserve Bank of St. Louis, speaks during the National Association of Business Economics’ Economic Policy Conference on February 26, 2018 in Washington, DC. (Joshua Roberts/Bloomberg via Getty Images/Getty Images)
Kashkari said: “If we skip in June it doesn’t mean we’re done with our tightening cycle, it just means we’re getting more information. Can we start lifting again in July?” Could, possibly?” They said.
The odds that the Fed will hike its rates by a quarter percentage point in June rose to 26.8% on Monday afternoon — up from 17.4% last week, according to data from the CME Group’s FedWatch tool that tracks trading.
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Dallas Fed President Laurie Logan also indicated last week that inflation remains “very high” and is not cooling enough to justify a pause in the tightening cycle next month.
“After raising the target range for the federal funds rate at each of the last 10 FOMC meetings, we have made some progress,” she said in prepared remarks for delivery to the Texas Bankers Association in San Antonio. “Data in the coming weeks may still show that skipping the meeting is appropriate. As of today, however, we are not there yet.”
Neil Kashkari, president of the Minneapolis Federal Reserve, during an appearance on CBS’ Face the Nation on July 31, 2022, described the current state of inflation as “very worrying” and continuing to “spread more widely across the economy.” (John Lampersky/Getty Images / Getty Images)
Although inflation has come down From a peak of 9.1%, it is more than double the pre-pandemic average and well above the Fed’s 2% target rate. On top of that, the labor market remains uncomfortably tight, with unemployment recently falling to 3.4% — the lowest rate since 1969.
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“The Fedspeak chorus this week is to remind markets that the Fed’s mandate is to restore price stability, and if inflation doesn’t cooperate, it will raise rates again to get the job done,” said Quincy Crosby, chief global strategist at LPL. ready to scale up.” financial.