© Reuters. Federal Reserve Barkin: Interest rates may increase to 5.5%-5.75% and will not cut interest rates until March next year
News from the Financial Associated Press on March 4 (edited by Niu Zhanlin)On Friday, Eastern Time, Richmond Fed President Thomas Barkin said that the U.S. benchmark interest rate may rise to 5.5%-5.75%, as some people in the market are currently betting on, and it is expected that the Fed will increase its interest rate by March next year. Will not start cutting rates.
The Federal Reserve has raised interest rates eight times in a row since March last year, with a cumulative rate hike of 450 basis points, raising the interest rate target range to 4.5% to 4.75%. Barkin’s speech means that interest rates will be raised by 100 basis points, which is far beyond the current market expectations.
When Barkin delivered his speech, the U.S. stock market had already closed. Fortunately, this was the case, otherwise the market may be hit again. On the same day, the S&P 500 Index rose 1.61%, the Nasdaq Composite Index rose 1.97%, and the Dow Jones Index rose 1.17%.
In his speech, Barkin said that the Fed needs to raise interest rates further to bring inflation back down to its 2% target, noting that while inflation may have peaked, it should not fall back quickly.
“I think it will take time to get back to the target level, so I think we still have work to do,” he said, emphasizing that policymakers already expect additional rate hikes and have made it clear that there will be no rate cuts this year.
“The fact that inflation is actually more resilient than a lot of people are predicting is not what I would have hoped for, but I can certainly imagine that,” Barkin told the media. “My assumption is that because of the actions we did last year, we’ve now allowed ourselves to Going into restrictive territory, when rates are rising at a more gradual pace than last year, we have an opportunity, what I call testing and learning, to see what happens to demand, employment, inflation.”
The inflation indicator most valued by the Federal Reserve – the core PCE price index in the United States rose by 4.7% year-on-year in January, an increase that exceeded economists’ expectations. Barkin said he was not sure whether the intensity of spending that was propping up inflation would continue, although employment and consumption remained strong at the start of the year. .
That would put some upward pressure on inflation as employees demand more wages, Barkin noted. He said two years of high inflation had encouraged businesses to believe they could keep raising prices, while leaving them “exhausted” by consumers seeking cheaper prices and employees whose salaries were no longer as high.
Barkin believes that “it makes sense to act more cautiously than we did last year. This is the moment where I need to rely on data again. If I am right and inflation persists, we can respond by raising interest rates further. Of course, I Also happy to see myself wrong.”
Speaking to reporters, Barkin said it was entirely possible that inflation would cool faster than he expected, implying a narrower path for interest rates. “And the nice thing about a shallower path of hikes is that even if you’re wrong, you can’t be that wrong,” he added.
Asked how many basis points the next rate hike might be, he gave no firm figures. But according to his recent statement, he tends to support the 25 basis point rate hike path. And Barkin expects the Fed will not start cutting interest rates until March next year.
