© Reuters. Is it a foregone conclusion for the Fed to slow rate hikes?Many voters voiced their support for downshifting to 25 basis points
News from the Financial Associated Press on January 21 (Editor Zhao Hao)Local time Friday (January 20), Philadelphia Chairman Harker said that he expects the Fed to raise interest rates a few more times, but it is appropriate to set the rate of each hike at 25 basis points.
Harker is a voting member of the Monetary Policy Committee (FOMC) this year. “In my view, our days of raising interest rates 75 basis points at a time are definitely over,” he said in a speech at the annual meeting of the New Jersey Bankers Leadership Forum.
Harker also said that after the end of the rate hike, the Fed will maintain a sufficiently restrictive policy rate for a period of time to allow monetary tightening to take full effect. He also noted that signs that inflation is cooling have been seen, but that the economy remains relatively healthy overall, which is encouraging.
In addition to Harker, another official with voting rights this year also expressed support for “downshifting and raising interest rates”. On Wednesday, Dallas Fed President Logan said that a further slowdown in rate hikes may be appropriate.
CME Group’s FedWatch tool shows that the market is now pricing in a more than 97% chance of a 25 basis point rate hike at the February meeting, and less than a 3% chance of a 50 basis point hike. At its December meeting, the Fed had already slowed the pace of rate hikes to 50 basis points from 75 basis points each.
But precisely because of the expectation that the Fed will slow down the pace of raising interest rates, the market mainstream began to believe that the Fed’s terminal interest rate will fall at 4.75%-5%. However, all the central bank officials who have spoken out so far are trying their best to argue that the rate hike will continue for a period of time, and the terminal interest rate will definitely exceed 5%, including Harker and Logan mentioned above.
Yesterday, Brainard, the “second-in-command” vice chairman of the Federal Reserve, emphasized that inflation has slowed down recently but is still high, and policy must ensure that inflation returns to 2%; the “third-in-command” New York Fed President Williams also said on the same day , monetary policy still has more work to do.
Within a few days, the latest data released by the National Association of Realtors (NAR) showed that sales of existing homes in the United States fell by 1.5% month-on-month to 4.02 million units in December last year, the lowest level since November 2010. , Existing home sales fell 34% year-on-year.
For the whole year, the total number of US existing home sales in 2022 will be 5.03 million units, a decrease of 17.8% from 2021, the largest annual decline since 2008, showing that the activity of the real estate industry continues to decline, and the negative effects of the Federal Reserve’s aggressive interest rate hikes on the economy are emerging.
