The market recently expected that the Federal Reserve is likely to raise interest rates by 4 yards this month to forcefully suppress the highest inflation in 40 years.
The US inflation data in June was hot, and Atlanta Fed President Raphael Bostic did not rule out the possibility of raising interest rates by 4 yards this month, causing fierce market volatility.
Ultra-hawkish general and St. Louis Fed President James Bullard said in an interview with Japanese media on Thursday that he is more inclined to raise interest rates by 3 yards.
“I think a size 3 has a lot of merit because it brings the benchmark rate to what the Fed considers a neutral level, recommending another rate hike of size 3 at the July meeting,” Bullard said.
He mentioned that if the Fed does the same thing again in its July meeting (with a 3-yard rate hike), it would be the second consecutive meeting of the Fed to take such a big move, which is unprecedented.
Federal Reserve Governor Christopher Waller also expressed his preference for a 3-yard rate hike on Thursday and was open to a 4-yard rate hike.
Waller explained: “I don’t want to raise rates too much, because the 3-yard range is already very large. Don’t think that if you don’t increase the 4-yard rate, it means that the Fed is not doing its job well.”
He also added: “My base case for the July meeting depends on the upcoming data, which will be preceded by key retail sales and housing data releases, and if these data are noticeably better than expected, I would be leaning towards a larger rate hike. .”
Traders in federal funds futures forecast a more than 80 percent chance of a 4-yard rate hike by the Fed in July, CME’s FedWatch tool showed before the market opened on Thursday, but the rate hike came after hawkish officials backed a 3-yard rate hike during the session. The chance of 4 yards is instantly cut in half to about 42%.
