On March 14, 2022 local time, the Federal Reserve Building in Washington, USA. People’s Vision Data Map
On March 22, local time, a number of Fed officials delivered speeches, supporting the Fed to raise interest rates to combat high inflation. Earlier, Fed Chairman Powell hinted in his speech that he would decide to raise interest rates by 50 basis points at a time if necessary.
2022 FOMC vote, Cleveland Fed President Mester said on the U.S. economic outlook and monetary policy that he does not think the option of raising interest rates by 50 basis points should be ruled out , preferring to raise interest rates to 2.5% by the end of 2022, that is, supporting the Fed to make about 9.6 standard rate hikes of 25 basis points throughout the year, while expecting further rate hikes above the neutral level in 2023.
“Based on my projections, I think we’re going to need to raise rates by 50 basis points at some meetings … we do need to get inflation under control,” Mester said. It is important to use rate hikes and balance sheet reductions to put inflation on a better trajectory. Balance sheet reductions will not be the main tool to fight inflation, but we will ‘do what we can’ to reduce inflation.”
Mester said the Fed needs to raise interest rates more significantly in the first half of the year and tighten policy further next year to reduce high inflation so that it does not become entrenched. The Russian-Ukrainian crisis has added upward pressure on inflation, which is already running at a 40-year high and three times the Fed’s 2 percent inflation target. “With inflation already at very high levels and demand outstripping supply, hyperinflation is continuing and the risk of a continued downturn in the economy is rising,” she said.
Brad thinks the Fed can achieve a soft landing. Because the real economy is doing very well, the labor market is doing the best it has been in recent years. “History tells us that the faster we turn,” Bullard said.The more likely we are to push inflation back to target and allow the U.S. economy to prosper. “
Bullard also believes that the Fed should start shrinking its balance sheet because the Fed has allowed its balance sheet to expand for too long and there is no reason not to start shrinking it right away, hopefully The Fed has adopted a dovish restrictive policy this year and cannot wait for geopolitical tensions to ease.
San Francisco Fed President Daly also expressed support for strong action. “The Fed may consider tightening to contractionary (monetary) policy,” said a speech at an online event hosted by the Hamilton Project at the Rukins Institution. The time has come for the Fed to raise interest rates to a neutral level. “
Daly said that given high inflation and a strong U.S. economy, the Fed needs to tighten policy. She expects the Fed’s policy adjustments and other factors to reduce inflation, But don’t think inflation will drop to 2% by the end of the year. Daly believes that inflation expectations look stable and good, and price increases are still expected to moderate; the pressure on the supply chain from the new crown epidemic remains a risk.
Goldman forecasts more aggressive rate hikes after Fed Chair Jerome Powell’s comments on inflation. Goldman leaves final rate forecast unchanged at 3% to 3.25%.
On March 21, local time, Fed Chairman Powell delivered a speech entitled “Restoring Price Stability” at the 38th Annual Economic Policy Conference of the National Association for Business Economics. Powell reiterated that the Fed will Take necessary steps to ensure prices return to stability. In particular, if the Fed deems it more aggressive to raise the federal funds rate by more than 25 basis points at one or more meetings, the Fed will do so. If it decides that monetary policy tightening is needed , beyond the usual neutral standard, and the Fed will do the same.
Goldman economists Jan Hatzius and David Merico “We now expect the Fed to raise rates by 50 basis points at both the May and June meetings, and 25 basis points at the remaining four meetings in the second half of 2022,” Mericle wrote in the report. bps, it will raise interest rates for 3 quarters between the first and third quarters of 2023. “
Barclays expects the U.S. dollar to rise first in the coming months as the relative outperformance of the U.S. economy fades and investors’ risk appetite improves , then weakened in the second half of the year. StrategistThey said in the report that while monetary policy tightening and the Russian-Ukrainian conflict to stimulate safe-haven demand will bring short-term support to the dollar, this situation may be reversed as global economic growth improves. An overvalued dollar, crowded positions and high current account deficits will also weigh on the greenback in the second half of the year.