Fed Chairman Ball poured cold water: It is too early to reiterate that the central bank is cautious and talks about cutting interest rates | Anue Juheng-International Politics and Economics

U.S. Federal Reserve (Fed) Chairman Jerome Powell on Friday (12/1) poured cold water on market expectations that the central bank will cut interest rates in the first half of next year. He said that the Federal Open Market Committee (FOMC) will keep interest rates at 22 If interest rates reach a new high in 2019, they will act cautiously and retain the option of further raising interest rates.

“So far, the Fed is proceeding cautiously as the risks of under-tightening and over-tightening are becoming more balanced,” Ball said Friday in remarks at Spelman College in Atlanta. “Determine where we stand now.” It is too early to say that it has become sufficiently restrictive, or to speculate on when policies might be loosened.”

Ball believes that the current inflation level is still “well above” the Fed’s target, but it is moving in the right direction. Therefore, the right thing to do now is to act cautiously and advance policy in accordance with economic data, but if the time is right, the Fed will Prepare for further interest rate hikes.

Policymakers, on the other hand, still view uncertainty about the economic outlook as “unusually high,” a factor that officials insist rates may still need to rise.

He also said that policy interest rates have entered a restrictive range, which means that tight monetary policy is putting cooling pressure on economic activity and inflation. However, the impact of monetary policy on economic conditions lags behind, and the full effects of tightening may not yet be felt.

Some analysts believe that Ball’s above-mentioned remarks imply that Fed officials will keep interest rates stable at the monetary policy meeting on December 12th and 13th to have more time to evaluate economic conditions.

However, he still emphasized the possibility of raising interest rates, which is consistent with the views expressed this week by Richmond Fed President Thomas Barkin and Fed Governor Michelle Bowman. They believe that if inflation persists, they will support further interest rate increases. .

It is worth noting that the broad outlines of a “soft landing” that Ball talked about appear to be taking shape, with the job market still strong despite slowing spending and economic growth and weakening price pressures.

Market analysts pointed out that Ball’s remarks partly confirmed the view that the Fed has at least ended raising interest rates because a series of tightening policies since March last year have cooled economic growth.

In addition, the market’s attention on possible interest rate cuts in the near future has been heightened by comments made by Fed Governor Christopher Waller this week. The hawkish governor said the Fed would be willing to consider cutting interest rates if inflation continues to trend lower. He cited monetary policy guidelines calling for lower policy rates as inflation cools.

Market Reaction

After Ball’s remarks, major U.S. stock indexes rose across the board, U.S. bonds 10-year yieldanddollar indexThe decline deepened. Jeffrey Roach, chief economist at LPL Financial, pointed out that the market believes that Ball’s remarks are moving closer to the dovish camp.

In addition, before Ball’s speech, a reporter from the Wall Street Journal (WSJ), known as the “Fed’s mouthpiece,” wrote an article stating that the Fed’s interest rate hike cycle may have ended, although officials are not yet willing to make a clear stance.

before deadline,Dow Jones Industrial AverageIt rose more than 270 points or nearly 0.8%, temporarily trading at 36,221.40 points.Nasdaq Composite IndexIt rose more than 50 points or nearly 0.4%, temporarily trading at 14,282.99 points.S&P 500 Indexrose nearly 0.5%, temporarily trading at 4,590.40 points,Philadelphia SemiconductorThe index fell nearly 0.3%, temporarily trading at 3,737.30 points.USA 10-Year Treasury Bond Yieldfell to 4.23%,dollar indexIt fell to 103.16.

According to the CME Group FedWatch Tool, the market’s expectation that the Fed will cut interest rates by 1 point (25 basis points) as soon as March next year has risen to nearly 60% (previously about 40%), and the chance of keeping interest rates unchanged is only about 30%, leaving only 1%. If the chance of success is less than that, it is believed that interest rates will be cut by two points (50 basis points).