Main Topic: U.S. inflation and the Federal Reserve's efforts to control it.
Key Points:
1. U.S. inflation has declined for 12 straight months, but consumer prices increased 3% year-on-year in June.
2. The Federal Reserve aims to reduce inflation to about 2% and plans to raise its key federal funds rate to over 5%.
3. The Fed is concerned about high inflation due to a strong labor market, rising wages, and increased consumer spending, and aims to slow the job market to control inflation.
Main Topic: The U.S. Federal Reserve's need to raise interest rates further to bring down inflation.
Key Points:
1. Governor Michelle Bowman supports the Fed's quarter-point increase in interest rates last month due to high inflation, strong consumer spending, a rebound in the housing market, and a tight labor market.
2. Bowman expects additional rate increases to reach the Fed's 2 percent inflation target.
3. Monetary policy is not predetermined, and future decisions will be data-driven. Bowman will consider consistent evidence of inflation decline, signs of slowing consumer spending, and loosening labor market conditions.
Main Topic: Federal Reserve officials express concern about inflation and suggest more rate hikes may be necessary.
Key Points:
1. Inflation remains above the Committee's goal, and most participants see significant upside risks to inflation.
2. The recent rate hike brought the federal funds rate to its highest level in over 22 years.
3. There is uncertainty about the future direction of policy, with some members suggesting further rate hikes and others cautious about the impact on the economy.
### Summary
The majority of economists believe that the U.S. Federal Reserve will not raise interest rates again and may even cut them by the end of March, due to positive economic indicators and low unemployment.
### Facts
- 90% of economists polled expect the Fed to keep interest rates in the 5.25-5.50% range at its September meeting.
- Roughly 80% of economists expect no further interest rate increases this year.
- The Fed's preferred measure of inflation is not expected to reach its 2% target until at least 2025.
- Confidence in the economy's ability to avoid a major downturn has led to expectations that interest rates will remain higher for a longer period, causing fluctuations in bond markets.
- 23 economists predict one more rate increase this year, while two expect two more increases to 5.75-6.00%.
- A majority of 95 economists expect rates to decrease at least once by mid-2024, but there is no agreement on the timing of the first cut.
- Nearly three-quarters of economists believe that shelter costs, a main driver of inflation, will decrease in the coming months.
- The real interest rate may be adjusted by the Fed based on inflation, which could prompt a rate reduction next year rather than a stimulus.
Source: [Reuters](https://www.reuters.com/business/futures-touch-fifers-hopes-us-fed-rate-cut-rise-boosted-2019-08-23/)
The tone of the Jackson Hole economic symposium in 2023 is expected to focus on how long rates will stay high rather than how far they may rise, as the bond market prices in a higher for longer policy path from the Fed, potentially delivering a blow to the market's expectation of a more accommodative Fed.
Two Federal Reserve officials suggest that interest-rate increases may be coming to an end, but one of them believes that further hikes may still be necessary depending on inflation trends.
Federal Reserve Chair Jerome H. Powell stated in a speech at the Jackson Hole symposium that the central bank is prepared to raise interest rates further if needed, signaling that they do not believe inflation is fully under control. The Fed will proceed cautiously and assess economic data as they determine whether to make further policy adjustments.
The Fed and bond market may be headed for a clash as they have differing views on whether interest rates are sufficiently restrictive to cool the economy and bring inflation back to target.
The dollar is expected to continue strengthening as bond yields rise, with the Fed likely to hike rates at least once more this year, and a barrage of economic data this week will heavily influence Fed policy decisions and impact the direction of the dollar and interest rates.
Cleveland Federal Reserve Bank President Loretta Mester believes that beating inflation will likely require one more interest-rate hike in the U.S. and then pausing for a while, although she may reassess her previous view of rate cuts starting in late 2024, and she aims to set policy so that inflation reaches the Fed's 2% goal by the end of 2025 to prevent further economic harm.
The Federal Reserve is considering raising interest rates again in order to reduce inflation to its targeted levels, as indicated by Fed Governor Michelle W. Bowman, who stated that additional rate increases will likely be needed; however, conflicting economic indicators, such as job growth and wage growth, may complicate the decision-making process.
The Federal Reserve meeting in September may hold the key to the end of the tightening cycle, as markets anticipate a rate hike in November, aligning with the Fed's thinking on its peak rate. However, disagreement among Fed policymakers regarding the strength of the economy and inflation raises questions about the clarity and certainty of the Fed's guidance. Market skeptics remain uncertain about the possibility of a "soft landing," with sustained economic expansion following a period of tightening.
The latest inflation data suggests that price increases are cooling down, increasing the likelihood that the Federal Reserve will keep interest rates unchanged in their upcoming meeting.
The Federal Reserve's preferred inflation gauge increased slightly in July, suggesting that the fight against inflation may be challenging, but the absence of worse news indicates that officials are likely to maintain interest rates.
A survey conducted by Bloomberg shows that most economists expect the Federal Reserve to hold interest rates steady until May and project one additional rate increase this year, although they do not believe the Fed will actually implement another increase.
The Federal Reserve is expected to hold off on raising interest rates, but consumers are still feeling the impact of previous hikes, with credit card rates topping 20%, mortgage rates above 7%, and auto loan rates exceeding 7%.
The Federal Reserve is expected to signal that another rate hike may be necessary due to strong economic growth and inflation metrics, creating a difference of opinion between the equity and bond markets.
The Federal Reserve is expected to keep interest rates unchanged at its meeting this week, but investors will be paying close attention to any indications of future rate increases as the central bank continues its fight against inflation.
The Federal Reserve is expected to keep interest rates steady and signal that it is done raising rates for this economic cycle, as the bond market indicates that inflation trends are moving in the right direction.
The Federal Reserve's continued message of higher interest rates is expected to impact Treasury yields and the U.S. dollar, with the 10-year Treasury yield predicted to experience a slight increase and the U.S. dollar expected to edge higher.
The Federal Reserve's upcoming meeting will focus on the central bank's expectations for key indicators such as interest rates, GDP, inflation, and unemployment, while many economists believe that the Fed may signal a pause in its rate-hiking cycle but maintain the possibility of future rate increases.
The Federal Reserve's plans for prolonged elevated interest rates may continue to put pressure on stocks and bonds, although some investors doubt that the central bank will follow through with its projections.
Central banks around the world may have reached the peak of interest rate hikes in their effort to control inflation, as data suggests that major economies have turned a corner on price rises and core inflation is declining in the US, UK, and EU. However, central banks remain cautious and warn that rates may need to remain high for a longer duration, and that oil price rallies could lead to another spike in inflation. Overall, economists believe that the global monetary policy tightening cycle is nearing its end, with many central banks expected to cut interest rates in the coming year.
Federal Reserve policymakers Governor Michelle Bowman and Boston Fed President Susan Collins expressed the need to keep interest rates elevated to combat inflation, with Bowman suggesting further rate hikes will likely be needed to bring inflation down to the Fed's 2% target and Collins stating that further tightening is not off the table as progress in battling inflation has been slow.
Investors are preparing for more inflation data from the US and Europe this week while still digesting the surprising and contradictory central bank decisions from last week, causing global markets to feel the heat as US bond yields surge and a strengthened dollar hits a six-month high.
J.P. Morgan strategists predict that the Federal Reserve will maintain higher interest rates until the third quarter of next year due to a strong economy and continued inflation, with implications for inflation, earnings, and equity valuations as well as potential impact from a government shutdown.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
Government bond yields are expected to continue their rise as fiscal concerns and anticipated higher interest rates weigh on the market, leading to losses in bonds and impacting equities and currencies.
The Federal Reserve's expected interest rate hikes have had a significant impact on gold and bonds, causing gold prices to decline and the US Dollar to reach a ten-month peak; however, concerns have been raised about whether these measures are sufficient to counteract inflation, leading to speculation about potential adjustments in rate policy.
Rising interest rates, rather than inflation, are now a major concern for the US economy, as the bond market indicates that rates may stay high for an extended period of time, potentially posing significant challenges for the sustainability of government debt.
The U.S. bond market is signaling the end of the era of low interest rates and inflation that began with the 2008 financial crisis, as investors believe that the U.S. economy is now in a "high-pressure equilibrium" characterized by higher inflation, low unemployment, and positive growth. The shift in rate outlook has significant implications for policy, business, and individuals.
The Federal Reserve will continue to raise interest rates as inflation resurfaces, according to Wall Street investor Caitlin Long, with big corporations benefiting while other sectors of the US economy are already in recession.
Billionaire investor Bill Ackman predicts that the Federal Reserve is likely done raising interest rates as the economy slows down, but warns of continuing spillover effects and expects bond yields to rise further.
Federal Reserve officials indicate that monetary policy will remain restrictive for a while to bring inflation back to 2%, but there is ongoing debate over whether to increase rates further this year.
The Federal Reserve is expected to continue reducing its bond holdings despite the recent surge in bond yields, as key measures of volatility and liquidity in the bond market are not indicating a significant risk, and higher credit costs align with the central bank's goal of restraining growth and lowering inflation.
Stock markets are wavering as investors anticipate another rate hike by the US Federal Reserve, fearing its impact on the global economy, however, recent inflation data suggests that inflation is declining and consumer spending is rising.
The Federal Reserve is facing a tough decision on interest rates as some officials believe further rate increases are necessary to combat inflation, while others argue that the current rate tightening will continue to ease rising prices; however, the recent sell-off in government bonds could have a cooling effect on the economy, which may influence the Fed's decision.
