Will the rate hike continue?

Posted by

Of course it will, the only question is how aggressively will the hike be.

Hawkish comments from several Fed presidents are countering a recent narrative taking hold of financial markets, in which policymakers would ease up on a recent tightening cycle given expectations of an economic slowdown. Stocks dipped on the remarks on Tuesday, while investors sent the 10-year Treasury yield up 15 basis points to the 2.75% level. The new spate of aggressiveness also saw the safe-haven dollar renew its surge, though there was still plenty of optimism that the U.S. could achieve a soft landing and avoid a formal recession.

St. Louis’ James Bullard: “I think that inflation has come in hotter than what I would have expected during the second quarter. Now that that has happened, I think we’re going to have to go a little bit higher than what I said before.”

San Francisco’s Mary Daly: “[The Fed is] nowhere near almost done. We have made a good start and I feel really pleased with where we’ve gotten to at this point, [but] people are still struggling with the higher prices. My modal outlook, or the outlook I think is most likely, is really that we raise interest rates and then we hold them there for a while at whatever level we think is appropriate.”

Chicago’s Charles Evans: “If we don’t see improvement before too long, we might have to rethink the path a little bit higher. We want to see if the real side effects are going to start coming back in line… or if we have a lot more ahead of us.”

Cleveland’s Loretta Mester: “We have more work to do because we have not seen that turn in inflation. It’s got to be a sustained, several months of evidence that inflation has first peaked – we haven’t even seen that yet – and that it’s moving down.”

You know what this means, right? More stock plunging, even strong dollars, etc.