Fed Sharpening Its 'Hawkish Claws'... "Rate Hikes If Necessary"

Williams, President of New York Fed, "No Need for Rate Cut"
Bostic, President of Atlanta Fed, "Rate Cut by Year-End"

Senior officials of the U.S. Federal Reserve (Fed) have been repeatedly making statements that dampen expectations of interest rate cuts. They have also indicated that they would not rule out the possibility of rate hikes if necessary.

According to Bloomberg on the 18th (local time), John Williams, President of the New York Federal Reserve Bank, said at the Semaphore World Economic Summit held in Washington that rate cuts should not be rushed and even mentioned the possibility of rate hikes.

John Williams, the third-ranking official of the U.S. Federal Reserve (Fed) and President of the New York Federal Reserve Bank, stated on the 18th (local time) at the Semapo World Economic Summit held in Washington DC that he would not rule out raising interest rates if necessary.
[Image source=AFP Yonhap News]

When asked about the possibility of a rate hike, President Williams said, "It is not the baseline, but if necessary, I would not rule it out." He added, "Monetary policy is in a good position," and "Since we are moving gradually toward the target, I do not feel any urgency to lower rates."

He also stated, "Eventually, rates will have to be lowered at some point, but the timing will be determined by the economy." President Williams is considered the third most influential figure within the Fed and holds voting rights on the Federal Open Market Committee (FOMC).

In addition to President Williams, other remarks dampening expectations for rate cuts were made that day. Raphael Bostic, President of the Atlanta Federal Reserve Bank, suggested the timing for rate cuts would be toward the end of this year during a speech in Florida. Earlier, President Bostic had said that there would be only one rate cut this year, reaffirming that view. He also left open the possibility of rate hikes, stating, "If inflation starts moving in the opposite direction of the target, there is no choice but to respond," and "We must remain open to rate hikes." President Bostic also holds voting rights on monetary policy decisions.

Neel Kashkari, President of the Minneapolis Federal Reserve Bank, responded "potentially yes" when asked on Fox News whether it would be appropriate to maintain rates considering rising inflation.

Until earlier this month, there was a view within the Fed that multiple rate cuts would be necessary within the year. However, due to a robust labor market and rising inflation trends, statements suggesting a delay in the timing of rate cuts have been emerging. On the 16th, Fed Chair Jerome Powell said, "Recent data has not clearly given greater confidence that inflation is making progress toward the Fed’s goal," and "It may take longer than expected to achieve that confidence."

Last week’s (7th?13th) new unemployment claims came in at 212,000, below the forecast of 215,000, indicating an overheated labor market. Additionally, the core Consumer Price Index (CPI) for March, released on the 10th, rose 3.8% year-over-year, exceeding market expectations for the third consecutive month.