US Central Bank Federal Reserve Washington Headquarters Raised 7 Times / AFP = News 1
Reporter Shin Ki-rim = Wall Street financial experts evaluated that the US central banks Federal Reserve system has shown a strong will to control inflation even if it has given up on growth, CNBC reported on the 16th.
The Feds monetary policy-making body, the Federal Open Market Committee, raised its benchmark interest rate by 0.25 percentage points for the first time since December 2018 after a two-day meeting. The dot chart showing interest rate forecasts suggested the possibility of interest rates rising seven times this year, including this year. This is more than the five or six rate hikes expected by Wall Street economists.
Mark Cavana, head of US short-term interest rate strategy at Bank of America, said the signal on the dot plot was hawkish, meaning it could sacrifice growth to catch inflation. The Fed said it would have to slow growth to achieve these results.
The newly updated growth forecast at the FOMC has been significantly lowered from 4.0% this year to 2.8%. In the bond market, the gap between long-term and short-term interest rates narrowed, suggesting the possibility of an economic slowdown. The yield on the 10-year Treasury bond rose to 2.246% and fell to 2.18% on that day, but the yield on the 2-year bond, which is sensitive to interest rate policies, was at 1.97%. When the two-year yield rises above the 10-year maturity, the short- and long-term interest rates reverse, which is interpreted as a sign of recession.
Kanaba said the Fed was in need of being much more aggressive and said the Fed was lagging behind on inflation and has now recognized it. A lagging Fed may have to raise rates much faster to catch inflation.
Michael Schumacher, an analyst at Wells Fargo, said the Fed appears to be engineering policy to bring inflation down quickly, noting that inflation was expected to come down too quickly.
The core inflation forecast for this year is expected to be 4.1%, but it has been raised by 1.4%p from 2.7% in December. However, next years inflation will only rise 0.3 percentage points from the previous 2.3% to 2.6%. Inflation in the coming year has risen from 2.1% to 2.3%.