OPINION
Market Rating Before FOMC MeetingJan 31
Despite Recession Hawkish Statements Come from FED Members
St. Louis FED President James Bullard, known as the representative of the hawkish wing of the committee, said that he expects growth to be positive in the second half of the year, adding that there is still a long way to go to achieve tight monetary policy. He also stated that he wants interest rates to reach 3.75-4 percent in a front-loaded manner in 2022. In addition, Bullard said they will bring inflation back to 2 percent over time.
Following this, Minneapolis FED Chairman Neel Kashkari emphasized that the FED acted very slowly in the last year in the fight against high inflation, and stated that interest rate cuts in 2023 are unlikely and they are focused on reducing the spreading inflation.
On the other hand, Richmond FED Chairman Thomas Barkin stated that recession fears are rather 'inconsistent' with about 400 thousand monthly employment gains and a 3.6 percent unemployment rate. FED Chairman Mary Daly remarked that they have not yet received data on the slowing of the US economy and that a rate hike of 50 basis points would be appropriate at the September meeting.
Finally, Chicago Fed President Charles Evans pointed to a 50-basis point increase in interest rates at the September meeting if inflation, which was at its peak in 41 years, did not decrease. He favored a 75 basis point rate hike if needed. Chairman Evans stated that the bank could continue on its way with a series of 25 basis point rate hikes in the first months of next year.
Indeed, after the FOMC members' hawkish pronouncements, global bonds, which had fallen due to increased stress from the US-China trade war, began to recover. Indicator US 10-years climbed from 4-month lows of 2.51 percent on Tuesday to 2.85 percent and stabilized around 2.74 percent. On the other hand, we see that the US dollar has increased its pressure on the currencies of developed countries again. After reaching the level of 106.50, the dollar index is currently (at 12:20 pm) showing the price around 106.00.
