FED speakers will put more light on the Economic situation!
Yesterday FED speakers opened the new round of speeches after the FOMC meeting and employment data, to give us more information on what they think about the economic situation and what is their outlook on inflation conditions.
Fed officials-Clarida, Bullard, Evans, spoke for the first time after the employment data. Vice-Chairman Clarida said that the labor market is expected to return to the pre-pandemic situation by the end of 2022, however, the inflation can also moderately increase 2% more than FED targets. Therefore he believes that it will be reasonable to raise interest rates in 2023 instead of 2024.” Later, Brad and Evans had a more hawkish tone. Brad E. Strum believes that the current central bank’s reduction in asset purchases should be accelerated, and will be better to raise interest rates twice in 2022. Evans` view is almost the same, he agrees that the Fed can increase the rates by next year if inflation rises sharply. And Finally, Huck, President of the Federal Reserve Bank of Philadelphia, tends to be dovish. He said that the Fed can not raise interest rates before the end of the reduction plan, and if there are no surprises, the current inflation situation is not enough to trigger the Fed to raise interest rates before the end of next year or early 2023. These speeches, more than anything else, telling, that Fed officials still have different views on raising interest rates. In any case, the market will still focus on Chairman Powell’s speech tonight for more relevant information.
After the pandemic, the economic reopening after long holidays, and supply shortage are the main inflation drivers this year. According to the latest survey results, consumers (households) expect inflation to reach 5.7% in the next year up from 5.3%of the previous survey, and the median inflation in the next three years will remain stable at 4.2%.
Today and tomorrow will have the Producer and consumer inflation numbers, which must be watched closely. Rising inflation or even staying at the current high level will encourage the FOMC members to increase the pace of tapering and raise the rates earlier than before. On the other hand, reducing inflation will out the FED position on the stronger side to hold its dovish policy for a bit longer time, and it will be positive news for Stock Markets.
