Several other officials have gone further, citing the need to raise rates in March and make four or even five hikes this year to control inflation, marking a clear change in outlook from just a few weeks ago. In December, US central bankers forecast that rates would rise three times this year and accelerated the pace of tapering their asset purchases to conclude the program in mid-March.
Williams avoided saying how many rate hikes it would take for the Fed to reach its 2% inflation target and did not provide a specific timeline for when it will start raising rates. ANDl “timing of such decisions will be based on careful consideration of a wide range of data and information, with a clear vision of our objectives of maximum price stability and employment”, He said.
However, he expressed confidence that the economy could handle the removal of the Fed’s pandemic support.
“The economy is well positioned in terms of where we are now with respect to employment and GDP, and it makes sense for monetary policy to evolve as the economy has,” Williams told reporters later. “Actually, we’re in a good position to do it in a way that’s not disruptive.”
The ECB, on the same page
The market is also reconsidering an earlier start for the European Central Bank’s first rate hike in more than a decade.
Money markets today briefly bet on a 10 basis point tightening from September, the first time a tightening is expected for that month since before the omicron variant rattled markets. Traders then again priced in a 10 basis point hike in October, followed by two similarly sized hikes in February and March 2023.
The anticipation of expectations for ECB action followed on the heels of Federal Reserve rate hikes, where a 25 basis point hike is forecast for March.
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told analysts on Friday that the Fed could raise its benchmark interest rate as much as seven times to fight rising inflation. Strategists at Morgan Stanley also added fuel to the tightening frenzy, predicting four 25 basis point rate hikes this year.
Not everyone is buying into the ECB’s tightening frenzy. “We expect inflation to gradually decline over the course of this year,” Anna Titareva, a European economist at UBS Group AG, said in an interview with Bloomberg Television. The ECB’s commitment not to raise rates this year is “in line with our estimate,” he added. Titareva expects the ECB to raise the deposit rate in mid-2023 after first wrapping up its asset purchase program.
Source From: Ambito
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