Contrary to market expectations of potential interest rate cuts in response to an impending economic downturn and potential recession, central bank officials have indicated their preference for maintaining and potentially raising rates.
During an interview with CNBC, Raphael Bostic, President of the Atlanta Fed, shared his belief that there will not be any rate cuts this year, even in the event of a recession. The Federal Reserve remains committed to achieving its 2% inflation target. Bostic emphasized the importance of adopting a "wait and see" approach to assess the effectiveness of the measures implemented thus far.
Neel Kashkari, President of the Minneapolis Fed, emphasized the need to complete the task at hand due to inflation persisting above the target levels. In April, inflation rose by 4.9% on an annual basis, which is still considered unacceptably high.
Austan Goolsbee, President of the Chicago Fed, stressed the significance of exercising prudence, patience, and gathering more data amidst heightened uncertainty. He mentioned that officials are closely monitoring credit stresses, the complexities surrounding the debt ceiling, labour market conditions, and prices.
According to the CME FedWatch tool, interest rate futures contracts indicate expectations for the policy rate to settle between 4.25% and 4.50% by the end of this year, which is lower than the current levels.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.