[Asia Economy New York=Special Correspondent Joselgina] Amid ongoing market expectations that inflationary pressures are easing, hawkish remarks from senior officials of the U.S. central bank, the Federal Reserve (Fed), have continued, calling for raising the benchmark interest rate above 5% and maintaining it at that level for some time.
According to Bloomberg News and others, on the 9th (local time), Raphael Bostic, President of the Atlanta Federal Reserve Bank, attended a forum hosted by the Atlanta Rotary Club and stated, "We must maintain our resolve to achieve the (2% inflation target)."
President Bostic emphasized that the Fed is doing its utmost to address the high inflation problem, which justifies raising interest rates to the 5-5.25% range to curb excess demand. He also drew a line against market expectations of a pivot, saying, "The Fed will maintain rates above 5% for a long time."
However, he also suggested that if the December Consumer Price Index (CPI) released this week shows easing inflationary pressures, the Fed might slow the pace of rate hikes to 0.25 percentage points.
On the same day, Mary Daly, President of the San Francisco Federal Reserve Bank, also emphasized that "the Fed will raise rates above 5%." She pointed out that it is "too early to declare victory" in the fight against inflation. This aligns with earlier remarks by Fed Chair Jerome Powell, who said clearer evidence is needed that inflation is continuously declining toward the 2% target, not just one or two data points.
President Daly forecasted that "rates should remain at restrictive levels for a longer period," considering it reasonable to maintain the peak for 11 months. When asked whether the rate level above 5% would be maintained for a long time, she replied, "Yes, it will."
Regarding whether the Federal Open Market Committee (FOMC) meeting scheduled for January 31 to February 1 will raise rates by 0.25 or 0.50 percentage points, she said, "No decision has been made yet," but left both possibilities open. Major foreign media interpreted these remarks as increasing the likelihood of a 0.25 percentage point hike in February.
In the market, expectations that inflationary pressures may ease further ahead of this week's December CPI release are spreading. Following a slight slowdown in wage growth reported in last week's December employment report, the 5% expected inflation rate over the next year, released by the New York Federal Reserve Bank on the same day, fell to its lowest level since July 2021.
Accordingly, it is expected that the CPI released on the 12th will confirm whether inflation is also slowing on a trend basis. Currently, Wall Street economists expect the December CPI to have risen 6.6% year-on-year, slowing from 7.1% in the previous month.
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