In an interview with Bloomberg on Friday (3rd), former U.S. Treasury Secretary Lawrence Summers called on Federal Reserve (Fed) officials not to rule out the possibility of raising interest rates by 2 yards in March, calling on Fed Chairman Paul Paul seized the opportunity to reset expectations for a rate hike at a hearing next month.
Summers pointed out on Friday that the Federal Reserve should now be open to raising interest rates by 2 yards in March. It is not in the right position at present, and interest rates are too far behind the curve. If it raises interest rates by 1 yard in March, I believe this is not appropriate. .
Fed Chairman Jerome Powell will testify on the economy at a congressional hearing next week. Summers called for Powell to then have the opportunity to reset rate hike expectations and address the Fed’s growing credibility problems.
Summers pointed out that Fed Chairman Powell and other Fed officials do not need to consider the change of raising interest rates by 2 yards, and the Fed should confirm the February non-farm payrolls report released next Friday before making a decision and market reaction.
According to Summers, six recent turbulences have hurt the Fed’s chances of seeking a soft landing for the economy, including:
- A seasonal revision to the consumer price index (CPI) removed a downward trend in inflation from data for the final months of 2022.
- January’s CPI showed an acceleration in inflation.
- The price index for personal consumption expenditures (PCE) also picked up.
- Economic indicators were strong in January.
- Wage growth slowed less than expected.
- U.S. bond yields soared,10-Year U.S. Treasury Yieldclimbed above 4%
“There is a risk of a sudden slowdown in the U.S. economy, and I’m very disappointed to see a number of Fed officials who seem to completely rule out the possibility of a 2-yard rate hike in March,” Summers said. Hopefully, Fed officials can guide Markets are open to a 2-yard rate hike in March.”
Like Summers, James Bullard, the hawk of the Federal Reserve and president of the Federal Reserve Bank of St. Louis, expressed his support for a 2-yard rate hike in March last month. Bullard has always advocated that “long-term pain is worse than short-term pain.” , hoping to raise interest rates at the fastest speed, and push the policy to a “sufficiently restrictive level” to curb inflation.
At present, the market does not rule out the possibility of returning to the 2-yard range after the Fed decided to slow down the rate hike to 1 yard in February. Traders see a 70 percent chance of a one-yard rate hike in March, according to the CME’s FedWatch tool. Bets on a 2-yard move rose to 30%, up from 17% two weeks ago.
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