US Job Openings Increase and Consumer Sentiment Improves... Momentum Builds for '3 Consecutive Giant Steps'

[Asia Economy New York=Special Correspondent Joselgina] Following Federal Reserve (Fed) Chair Jerome Powell's 'hawkish' Jackson Hole speech, major economic indicators have also exceeded market expectations, strengthening the case for a 'third consecutive giant step (0.75 percentage point rate hike).' Hawkish remarks from Fed officials continue to pour in daily.

Major foreign media outlets, including Bloomberg News, reported on the 30th (local time) that both U.S. job openings and consumer confidence index released exceeded market expectations, increasing the likelihood that the Fed's monetary tightening stance will be maintained for a considerable period.

According to the U.S. Department of Labor, job openings at U.S. companies in July reached 11.2 million, an increase of 200,000 from the previous month. This surpasses not only the previous month's figure (11.04 million) but also experts' forecasts (10.47 million). Despite recession concerns, it was confirmed that many companies are still struggling with labor shortages, further supporting the Fed's tightening measures going forward.

Consumer sentiment, which had been declining for three consecutive months, turned upward. The August consumer confidence index compiled by the U.S. Conference Board was 103.2, significantly exceeding market expectations. This marked a rise for the first time in four months. Bloomberg News reported, "There was a firm purchase plan for home appliances and automobiles," adding, "Both job creation and consumer confidence index exceeded expectations, showing strong household and labor demand."

However, despite consecutive high-intensity tightening, it was confirmed that upward inflationary pressures persist due to robust labor and household demand, increasing the likelihood of the Fed implementing three consecutive 0.75 percentage point rate hikes. Sarah House of Wells Fargo evaluated, "The Fed's efforts still have a long way to go." Derek Holt, economist at Scotiabank, analyzed, "Consumers continue to spend, which may indicate inflationary pressures urging the Fed to maintain its tightening path." He added that the Fed is expected to raise rates by 0.75 percentage points in September.

Hawkish remarks from Fed officials also continued. John Williams, President of the Federal Reserve Bank of New York, stated that "restrictive policies will need to be maintained for some time." He emphasized that the Fed's focus is achieving the 2% inflation target and said rates must be raised to a level that can reduce inflation through economic contraction. He added that the tightening stance should be maintained next year as well, stressing, "This is not something to be done briefly and then reversed." He explained that rate cuts will only be possible after a considerable amount of time.

Thomas Barkin, President of the Richmond Fed, also said in a speech in West Virginia on the same day that "we are doing our best to bring inflation down to the target range," but predicted that "inflation will not fall as quickly or evenly as expected." While acknowledging the clear risk of a recession, he added that even if a recession occurs, it will not take the form seen in 2008.

Raphael Bostic, President of the Atlanta Fed, also argued that the current inflation is too high to ease the tightening stance. However, he mentioned that if clear signs of easing inflationary pressures emerge, the Fed could step back from a 0.75 percentage point hike. He also acknowledged that excessive tightening could lead to slower economic growth and higher unemployment.

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) rate futures market currently reflects over a 70% probability of a giant step in September.

Amid heightened tightening concerns, the New York stock market closed down across the board on the day, marking a three-day consecutive decline. The two-year Treasury yield, sensitive to monetary policy, hit an intraday high of 3.497%, the highest in 14 years. Investors are awaiting the employment report to be released on the 2nd.