[Asia Economy New York=Correspondent Baek Jong-min] On Wall Street in the United States, there is a forecast that the Federal Reserve (Fed) will raise the benchmark interest rate more than four times this year. Fed Chair Jerome Powell also expressed his determination to prevent inflation from becoming entrenched, increasing the likelihood that the U.S. tightening will proceed at an unprecedented pace.
Jamie Dimon, CEO of JP Morgan Chase, known as the "Prince of Wall Street," predicted on the 10th (local time) that the Fed could raise interest rates more than four times this year. Dimon said, "Inflation could rise more than the Fed expects. Personally, I would be surprised if the Fed only raises rates four times this year."
Dimon's remarks are more aggressive than Goldman Sachs' earlier forecast of four rate hikes this year. JP Morgan's house view also expects four rate hikes this year. Citigroup shares the same opinion.
The possibility of more than four rate hikes is also recognized by the market. The Chicago Mercantile Exchange FedWatch tool estimates a 31.8% chance of a fifth rate hike in December. Just a month ago, the probability was only 14%.
Fed Chair Powell, who will lead monetary policy, avoided specific comments on rate hikes in his first public remarks since the spotlight on the March rate hike and the possibility of early quantitative tightening, but expressed a strong commitment to curbing inflation.
In a written statement released a day before his Senate confirmation hearing, Powell said, "We will use all tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched."
He acknowledged, "I understand that the surge in inflation is hitting people who cannot afford rising food, housing, and transportation costs very hard," and said he is fully committed to stabilizing inflation."
Powell diagnosed that the mismatch between supply and demand and bottlenecks caused during the rapid and strong economic recovery process led to price increases.
Powell's remarks also suggested that the post-COVID-19 economic recovery process might differ from the past, but the emphasis remains on curbing inflation.
With the unemployment rate falling to 3.9% in December last year and the Consumer Price Index (CPI) expected to reach 7%, it is difficult for the Fed to delay rate hikes to support employment recovery.
The Wall Street Journal (WSJ) predicted that Powell will secure congressional support for his reappointment but may face criticism from lawmakers over abrupt changes in monetary policy. WSJ also forecasted that President Biden’s political fate, whose approval ratings have plummeted due to soaring inflation, depends on Powell’s response.
Meanwhile, Powell claimed in his remarks that the Fed has already reflected the progressive camp’s demands regarding climate change response. Powell explained that the Fed has raised capital and liquidity requirements for large banks and strengthened supervisory efforts on the financial sector’s response to climate change. He also emphasized, "We will not let our guard down against new and emerging threats."
This is interpreted as meaning that progressive lawmakers such as Senator Elizabeth Warren intend to incorporate their criticisms that the Fed has relaxed regulations on large banks and is lagging in climate change response into policy.
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