FED Still Pushing for Several 50 BPS Rate Hikes Until the End of 2022, Keeping the USD Bullish
The USD has reversed higher again resuming the larger bullish trend and by the looks of it, the FED will keep it bullish until the end of 20
The FED started hiking interest rates earlier this year and in the last meeting, they delivered a 50 basis points (bps) rate hike. They have made it clear that they have a steep projection regarding increasing interest rates, at least in 2022, as inflation keeps surging, despite failing to stop inflation so far. At least, this is helping the US dollar, which seems to have resumed the larger bullish momentum again after retreating for more than two weeks. A number of FED members made bullish comments earlier:
Fed’s Daly on CNBC
- We know we want to be at 2.50% by year-end
- Says she’s not forecasting beyond the next couple of meetings
- We need to get rates to neutral
- Let’s get to neutral as quickly as we can
- Says she’s open to pulling the reins back on the economy but it’s too early to proclaim what they will do
- Looking for supply to recover and demand to come down
- If supply doesn’t recover and demand doesn’t slow, they need to put rates into restrictive territory
- I hope inflation has peaked but I don’t want to declare victory
- I don’t see signs of a wage-price spiral
- I don’t see a recession
Daly has been a mouthpiece for Powell in the past so I wouldn’t rule out this kind of shift from the Fed chair as well. The talk about restrictive policy won’t sit well with markets.
St Louis FED President Bullard
- Current US macro situation straining Fed’s credibility on inflation
- A pace of 50 bps per meeting is a ‘good plan’ for now
- A good chunk of inflation is persistent and will require concerted action
- I would put neutral at about 2% but will need to go above that to bring down inflation
- The rise in 1-to-3 year inflation expectations is concerning
- I don’t take relatively stable long-term inflation expectations as a sign the Fed doesn’t have to do much
- It’s too early to say if we’ve seen a peak in inflation, will need more than a few tenths to make a judgment
Although, Bullard has been consistently hawkish, even if he’s reigned it in a bit lately.
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