Fed hawks turn dove?George: Hasty expansion of rate hikes brings huge uncertainty
Financial Associated Press, June 18 (Editor Zhao Hao) On Friday (June 17) local time, Kansas Fed President Esther George issued a statement explaining why she voted in previous Fed resolutions. No vote.
The Federal Open Market Committee (FOMC) of the Federal Reserve on Wednesday (June 15) raised interest rates by 75 basis points as expected by the market, raising the benchmark interest rate to a range of 1.50%-1.75%, the largest rate hike since 1994. Minutes are displayed. George was the only member of the 11 voting members who voted against it, and she was more in favor of raising interest rates by 50 basis points.
(Orange box on the Dovish Hawks Spectrum is the new voting committee for 2022) George was appointed Kansas Fed President in October 2011, and she favors tighter monetary policy than her Fed peers. Bank of America Global Research believes that George is the most hawkish of all committee members, so her actions at this meeting took the market by surprise.
In the latest statement, George explained that she believes that a sudden increase in rate hikes while the Fed is shrinking its balance sheet will increase policy uncertainty. The statement emphasized that she does believe that in the current high inflation situation, there is a reason to continue to move away from easing, as she has not seen any real signs of deceleration in inflation.
“I have been advocating for some time to stop asset purchases and start shrinking the $9 trillion balance sheet, along with the need to return interest rates to more normal levels,” he wrote.
“However, the speed at which rates are adjusted is important, the impact of policy changes on the economy is delayed, and changes that are large and abrupt can be unsettling for households and small businesses. In addition, this affects the yield curve and traditional Bank lending model.”
In fact, the Fed’s move from raising interest rates by 50 basis points to 75 basis points this time is indeed unusual from its operations in recent years: the year-on-year growth rate of the U.S. consumer price index (CPI) released last week exceeded expectations and refreshed a nearly 40-year high. , and the “Wall Street Journal” report released only two days ahead of schedule officials may increase the rate hike news.
In recent years, financial market expectations of interest rate changes have mainly come from the recent speeches of officials and the dot plot that began to be popularized during the Bernanke era, gradually alienating the tradition of letting it pass through the Wall Street Journal.
However, because the latest CPI announcement happened to fall in the period of silence before the interest rate discussion, the unexpected data unexpectedly gave the “Federal Reserve News Agency” the opportunity to return to the market for a limited time. However, as George said, the financial market had a “thunder” on Monday, with the Nasdaq leading the decline and the S&P entering a bear market.
As for whether George has since turned hawk, market analysis may not be the case. Historically, George has been a “regular” voter against it – 16 times in total, 15 times he felt that austerity was not enough.
(Data source: St. Louis Fed) It is worth mentioning that in eight meetings in 2013, she voted a total of seven times against it, and she felt that the Fed under Bernanke should raise interest rates as soon as possible.