December FOMC Adding More Variables? Federal Reserve Voting Members Warn of Stubborn Inflation, Cannot Confirm End of Rate Hikes Yet
In the 23rd year, FOMC voting member Kashkari expressed concerns about persistent inflation and believed that more information is needed to make clear decisions on future monetary policies.
With recent statements from the Ministry of Finance and the Federal Reserve, market expectations for US monetary policy have shifted from "possibly one more rate hike this year" to "almost certain no rate hike".
However, there are still uncertainties. One Federal Reserve voting member stated that he still leans towards further tightening of monetary policy.
On Monday local time, Neel Kashkari, a 23-year FOMC voting member and President of the Federal Reserve Bank of Minneapolis, said in an interview with the media:
"Tightening monetary policy will not allow us to reach our 2% target within a reasonable time frame."
He believes that the facts have proven that the US economy is resilient, and he is more concerned about the risk of inflation rising again. Furthermore, he pointed out that "some price and wage data have already indicated that the inflation rate may stabilize above 2%."
The Federal Reserve maintained its stance at the November policy meeting and sent a dovish signal. Some market participants believe that the comments from Federal Reserve Chairman Jerome Powell may indicate that, against the backdrop of significantly lower inflation compared to last summer, a seemingly cooling job market, and a slight increase in the unemployment rate, the rate hike may have already been completed.
The unexpectedly weak non-farm payroll data released last Friday showed that the US economy added only 150,000 jobs in October, and the unemployment rate rose to 3.9%. The number of job additions in the previous two months was also revised down, with job additions in August decreasing from 227,000 to 165,000. The substantial growth in September decreased from 336,000 to 297,000. In addition, the recent surge in long-term US bond yields has pushed up interest rates for consumers and businesses, effectively achieving an "implicit rate hike".
Kashkari stated that he needs more information to make a firm decision on the future direction of interest rates:
"I'm not ready to say that our situation is good."
The final FOMC meeting of the year will be held on December 12-13. Currently, the CME FedWatch Tool shows that traders are betting with a 92.8% probability that there will be no rate hike.
