The four major central banks of the United States, Europe, Japan, and the United Kingdom have issued strong statements: there is more tightening to come.

Developed country central bank governors have strongly countered the "end of rate hikes" argument.

On Wednesday, at the central bank forum hosted by the European Central Bank, central bank governors including those from the Federal Reserve, European Central Bank, Bank of England, Bank of France, and Bank of Japan all indicated the possibility of further tightening of monetary policy.

Federal Reserve Chairman Jerome Powell emphasized that given that inflation remains higher than expected and economic data such as durable goods orders and consumer confidence show the resilience of the US economy, there will be more tightening policies this year, and the possibility of rate hikes at consecutive meetings cannot be ruled out:

The time for restrictive rates is not long enough.

European Central Bank President Christine Lagarde stated that the European Central Bank has not seen sufficient concrete evidence that potential inflation is stabilizing and declining, and it is very likely that there will be another rate hike in July.

Market analysis believes that Lagarde's view on current fiscal policy indicates that no moderate assistance should be expected from the European Central Bank:

A person must do what they have to do.

Bank of England Governor Andrew Bailey stated that the Bank of England's rate hike last week was a response to the resilient UK economy and unexpected sustained inflation, and he added that the effect of a one-time 50 basis point rate hike would be better than two consecutive 25 basis point rate hikes:

(Market speculation) has already priced in some further adjustments. My answer is: Well, let's see.

Francois Villeroy de Galhau, Governor of the Bank of France, said that the duration of keeping rates high is more important than the actual level of rates, and rates are close to the level needed to bring inflation back to 2%.

Even Bank of Japan Governor Haruhiko Kuroda stated that after decades of stagnation, wage and price growth in Japan is accelerating, which has led officials to consider the possibility of abandoning ultra-loose monetary policy:

If we have reason to believe that (inflation will rise in 2024), it would be a good reason to change policy.

Last year, the Federal Reserve, European Central Bank, and Bank of England began implementing the most aggressive credit tightening policies in decades in an attempt to bring the inflation rate down to 2%.

The Federal Reserve turns hawkish again

After Powell's speech, the futures market priced in a 79% chance of a rate hike by the Federal Reserve in July, up from 74%.

Powell emphasized that strong demand for labor is supporting higher consumer spending, which could sustain ongoing demand:

The labor market is indeed driving the economy. In the past few months, what we have seen is stronger-than-expected economic growth, a tighter labor market than expected, and higher-than-expected inflation.

Powell stated that the decision not to raise rates in June is simply a continuation of the Federal Reserve's slowing pace of rate hikes. Slowing down the pace of rate hikes indicates that the Federal Reserve is trying to gather more information from the data and observe the effectiveness of tightening policies. Federal Reserve Chairman Powell pointed out that due to the rapid pace of interest rate hikes by the Fed last year, there was not enough time to see the impact of rate hikes on economic activity slowdown and inflation. Although monetary policy is restrictive, it may not be restrictive enough, and the restrictive period may not be long enough.

While acknowledging the possibility of a significant economic downturn in the United States, Powell does not believe that a recession is the most likely outcome. He expects core inflation (excluding food and energy) to fall back to the Fed's 2% target by 2025:

If inflation declines significantly and we have confidence that the inflation rate will reach 2%, then the situation will be different. We will start considering easing policies. But we still have a long way to go to reach this target. This is not something we are considering now or in the near future.

Analysis suggests that Powell's assessment of core inflation indicates that policymakers will maintain high interest rates for a longer period than investors currently expect.

After Powell's speech, the market increased its bets on further rate hikes by the Fed this year. Most economists predict a 25 basis point rate hike in July, raising their expectations for the Fed's policy rate to 5.375% by the end of this year and 4.375% by the end of next year.

European Central Bank: Continuously Hawkish

Since the start of the rate hike cycle, ECB President Lagarde has consistently maintained a hawkish stance, and this time is no exception.

Lagarde said that there is currently no consideration of adjusting the inflation target. She said that during a period of interest rate cuts, no central bank would consider where the threshold for inflation is. "Just like persistent inflation, we must persist (in our actions) until we reach the established inflation target."

She believes that the impact of rate hikes will last longer because more households are now using fixed-rate mortgages. In the eurozone, the scale of such loans is larger than about fifteen years ago.

When asked about pausing rate hikes, Lagarde replied, "This is not something we are currently considering."

Lagarde said that there is not enough concrete evidence to suggest that potential inflation is stabilizing and declining. The media believes that this echoes recent comments from other ECB officials expressing concerns about sustained pressure on core prices.

Similar to Powell, Lagarde also acknowledges the risk of an economic downturn but believes that a recession is unlikely to occur.

Bank of England: A 50 Basis Point Rate Hike Has a Better Effect

Facing persistent inflation, Bank of England Governor Andrew Bailey remains quite aggressive.

He expects overall inflation to "decline significantly" in the coming months, but core inflation in the UK is more sticky.

He added that the UK has a strong labor market, and many companies are hoarding labor in the face of recruitment difficulties.

Regarding the current reduction of the Bank of England's balance sheet, Bailey stated that the reduction is proceeding "very smoothly" and that they need to consider what the natural level of the balance sheet is. He further stated that even if the balance sheet reaches a balanced level, the Bank of England may continue to sell some assets.