Given the slow and bumpy progress in reducing inflation in the United States, and the continued strength of the US economy, more and more Federal Reserve officials are beginning to send similar signals to the outside world: there is no rush to cut interest rates yet.
On Thursday Eastern Time, multiple Federal Reserve officials issued clearer signals, which also raised concerns in the market about the prospect of future interest rate cuts.
Several Federal Reserve officials have set off hawks one after another
On Thursday Eastern Time, John Williams, the "third in command" of the Federal Reserve and Chairman of the New York Fed, once again expressed his view that "there is no rush to cut interest rates yet", leading to a rise in US bond yields and a decline in US stocks.
Later, two other hawkish members of the Federal Reserve, Atlanta Fed President Bostic and Minneapolis Fed Chairman Kashkari, released even stronger "hawk" voices to the outside world.
Atlanta Fed President Bostic has previously stated multiple times that he expects to only cut interest rates once this year. In his speech on Thursday, he reiterated this viewpoint, stating that his view on the possible timing of the first interest rate cut is "the end of this year," and stating that "I am willing to maintain patience.".
Bostic said he still believes that inflation is moving towards the central bank's target of 2%, but this process may be slower than expected:
"The inflation rate is very high - too high - we need to reach the target of 2%... I am willing to be patient."
Bostic is the voting committee member of this year. He pointed out, "Our current position - which I believe is restrictive - will slow down the economy and ultimately lower our inflation rate to 2%. But in this process, I will not rush to push forward."
Compared to Bostek's expectation of a rate cut once a year, "Eagle King" Kashkari's view is more radical. He stood in line and did not lower interest rates for the year.
Kashkali is not the voting committee for this year. He said he also hopes to maintain patience, and the first interest rate cut may not be suitable until next year.
When asked if it is appropriate to maintain stable interest rates this year given the unexpected upward trend in recent inflation data, Kashkari said it is "possible".
"I think we need to watch and be patient as long as we need to, until we are confident that the inflation rate is falling to 2%," he said.
More and more people are talking about raising interest rates
It is worth noting that more and more Federal Reserve officials have recently talked about the prospect of interest rate hikes.
Williams said on Thursday that although raising interest rates is not his "baseline scenario," it is possible if economic data proves that this action is necessary.
And Bostek also mentioned raising interest rates in his speech:
"Controlling inflation is crucial... If inflation stagnates or develops in the opposite direction, I must remain open to raising interest rates."
The market has started to worry about not lowering interest rates within the year
Just a few weeks ago, the attitude of many Federal Reserve officials was not as hawkish. Faced with the Federal Reserve's tightening monetary policy, they expected US inflation to cool down, so it was necessary to cut interest rates multiple times before the end of the year to prevent excessive economic slowdown.
However, the recent economic data has clearly made them feel a bit embarrassed: the US CPI has risen more than expected for three consecutive months, and other economic indicators also indicate that US retail spending is hot and the job market is strong, which has made them increasingly downplay their expectations for recent interest rate cuts.
With the quiet shift in the Fed's rhetoric, financial markets have also begun to digest the decrease in the number of rate cuts this year and the postponement of rate cuts.
Now, futures contracts settled at the Federal Reserve's policy rate reflect that the market expects the first rate cut of the year to occur in September, compared to the expectation of the first rate cut in June a few weeks ago. In addition, CME's FedWatch tool shows that the market expects only a 50% chance of reducing interest rates twice by the end of this year.
JPMorgan Chase President Daniel Pinto even warned on Thursday that given high inflation levels, the Federal Reserve may not cut interest rates at all this year.
Pinto stated that the Federal Reserve may have to wait for a longer period of time before lowering interest rates, but the likelihood of a rate hike is very, very low. He believes that the Federal Reserve is not in a hurry to take action now, as cutting interest rates too early would bring painful consequences and could lead to an economic recession. Recent economic data shows that inflation in the United States is still higher than many expected earlier this year, reducing the likelihood of the Federal Reserve cutting interest rates quickly.