Federal Reserve’s mouthpiece: Bank turmoil may cause the Federal Reserve to suspend interest rate hikes

According to a recent article by Nick Timiraos, the “shadow official” and mouthpiece of the Federal Reserve, more investors are currently anticipating that the Federal Reserve’s interest rate hike cycle may have ended due to the broader financial turmoil caused by the collapse of two regional banks in the United States in the past week. Michael, chief US analyst at JPMorgan Chase, said that suspending interest rate hikes now would send a false signal about the seriousness of the Fed’s efforts to address inflation issues, which could also exacerbate concerns that the Fed is hesitant to raise interest rates. On Wednesday, the market believed that the probability of the Federal Reserve reducing interest rates below 4% by the end of the year was close to 70%. Federal Reserve officials say their policies are mainly implemented by tightening the financial environment, such as rising borrowing costs, falling stock prices, and a stronger dollar. “But the effects of these policies will not be immediately apparent. Most importantly, they do not want the financial situation to tighten to a point where it is out of control.”. If there is a more serious collapse in the financing market, including the purchase and sale of US treasury bond bonds, it may make the future decision of the Federal Reserve more difficult. In summary, the Federal Reserve is facing a difficult task, but at the same time, it needs to tighten policies to combat inflation.

Interpretation of this information:

The article discusses the current situation and expectations regarding the Federal Reserve’s decision on interest rate hikes. The recent collapse of two regional banks in the US has caused financial turmoil, and some investors believe that the interest rate hike cycle may have ended. However, the chief US analyst at JPMorgan Chase argues that suspending interest rate hikes now could send a false signal about the seriousness of the Fed’s efforts to address inflation issues. The Federal Reserve officials state that their policies aim to tighten the financial environment, but the effects of these policies may not be immediate. Additionally, the Fed wants to avoid tightening to a point where it is out of control. If there is a more serious collapse in the financing market, it may make future decisions more difficult. In short, the Federal Reserve is facing a difficult task of tightening policies to combat inflation while dealing with financial turmoil caused by the collapse of regional banks.