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Investing.com – Investors are betting that the Federal Reserve, which has raised rates to their highest levels in 22 years, has finally finished raising rates, especially since the data does not yet support a new rate hike.
Today’s inflation data was mixed this time, but it did not bring any major surprises, as the monthly and annual headline CPIs exceeded expectations. While the monthly and annual core consumer index data were in line with expectations.
While the US unemployment claims data released a short while ago came close to expectations, and to the previous reading as well.
Several senior Federal Reserve officials have indicated in recent days that the central bank’s efforts to cool the economy through rising borrowing costs are being amplified by recent market moves that are essentially doing some of that job for them.
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In particular, attention has focused on rising US bond prices, with the 10-year yield briefly touching a two-decade high last week. This yield is extremely important because it acts as a basis for the market, supports interest rates on many other types of borrowing, from mortgages to corporate debt, and influences the value of companies on the stock market.
Investors have sharply lowered expectations for another interest rate hike before the end of the year. They see a one in four chance that policymakers will be able to raise rates again.
However, investors expected the Fed to stop raising interest rates before and were proven wrong. There is still a chance now that the market dynamics that are helping to drive up borrowing costs could reverse. This week, the 10-year yield fell, for example.
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The Federal Reserve has raised its key interest rate from near zero to over 5.25 percent over the past 19 months in an attempt to tame inflation. But the Fed directly controls very short-term interest rates. It may take some time for its movements to cascade through the economy to affect long-term borrowing costs – the kind that affect mortgages, business loans and other areas of credit.
There are likely several reasons why long-term interest rates in the markets have risen sharply over the past two months. As Wall Street may be approaching the possibility that the Fed will leave borrowing costs at high levels for an extended period, and economic growth has been strong, some investors may be concerned about the extent of the nation’s debt.
Over time, higher interest rates on Treasury securities are likely to weigh on the economy, and Fed officials have been clear that it can do some work to further raise interest rates for them.
Officials had predicted in September that they might need to take another step on interest rates this year. But Mr. Jefferson’s comments, along with some of the Fed’s more inflation-focused members, were widely seen as a signal that the Fed was likely to be more dovish.
Lori K said: Logan, president of the Federal Reserve Bank of Dallas, said Monday that higher bond yields “could do some economic cooling for us, resulting in less need for additional tightening of monetary policy.”
Inflation data released recently
The index for September recorded 3.7%, and expectations indicated an increase of only 3.6%, after recording 3.7% last August.
As for 0.4% in September, expectations were at 0.3%, after rising by 0.6% in August data.
While it recorded (excluding food and energy) on an annual basis 4.1% in September, which is in line with expectations, after recording 4.3% in August, and recorded 0.3% in September according to expectations, after recording an increase of 0.3% in August.
Interest expectations
It is expected, as the interest rate is expected to be fixed at 87.8% at the next meeting, compared to 12.2% expectations for it to be raised by 25 points.
At the December meeting, markets also expect interest rates to be held at current levels of 60.9%.
2023-10-12 14:00:00
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