The United States confirms its continued stance of tightening monetary policy
2023-07-07
■The FOMC meeting summary indicates that several participants initially advocated for a 0.25% increase in interest rates.
■ All participants are in favour of the continuation of tightening policies and the possibility of resuming interest rate hikes further increases.
Yesterday, the summary of the Federal Open Market Committee (FOMC) meeting held on June 13 and 14 was released. At this meeting, the policy interest rate will remain unchanged and it has been decided to suspend the interest rate that has been ongoing since March 2022. The economic, price, and policy interest rate forecasts for FOMC participants centered around 2023 in the "Summary Economic Projection (SEP)" will be raised from March. Although it indicates the need to further increase interest rates to achieve inflation targets, policy interest rates remain unchanged, and at first glance, the opposite decision appears to have been made. The process and reasons for making such a judgment in the main points of the discussion are as follows.
(1) Under the background of disinflation, slow expansion of economic activities, signs of easing labor supply and demand tension, uncertainty of economic activities with deteriorating credit conditions, etc. since the middle of 2022, the cumulative effect of monetary tightening and the lag of policy effects are clear, and almost all participants (most all) agree with the fixed policy interest rate.
(2) On the other hand, due to the extremely tight supply and demand of labor, the momentum of economic activity has exceeded previous predictions, and there are clear and foreseeable signs of a return to the long-term 2% inflation target, which can hardly be confirmed. Several participants (some) initially advocated for a 0.25% interest rate.
(3) For the future policy outlook, all participants continue to adopt a tightening policy attitude. Almost all participants are based on SEP and it is advisable to increase interest rates in 2023.
The above content is consistent with the recent speech by the Chairman of the Federal Reserve of the United States, Powell, which showed that when the economy follows SEP's estimated trend, interest rates need to be raised more than twice within the year to bring prices down to the target level. However, there is no specific guidance on the timing of future interest rate hikes, and it is expected that each meeting will be judged based on price and labor-related indicators, which can be confirmed before this. While the economic bottom is being maintained, the tension between labor supply and demand remains unresolved, and concerns about sustained inflation remain unresolved. Therefore, the scope for the Federal Reserve to continue raising interest rates is expanding. We believe that unless there are obstacles to additional interest rate hikes, the likelihood of a resumption of interest rate hikes in July is extremely high.
■ All participants are in favour of the continuation of tightening policies and the possibility of resuming interest rate hikes further increases.
Yesterday, the summary of the Federal Open Market Committee (FOMC) meeting held on June 13 and 14 was released. At this meeting, the policy interest rate will remain unchanged and it has been decided to suspend the interest rate that has been ongoing since March 2022. The economic, price, and policy interest rate forecasts for FOMC participants centered around 2023 in the "Summary Economic Projection (SEP)" will be raised from March. Although it indicates the need to further increase interest rates to achieve inflation targets, policy interest rates remain unchanged, and at first glance, the opposite decision appears to have been made. The process and reasons for making such a judgment in the main points of the discussion are as follows.
(1) Under the background of disinflation, slow expansion of economic activities, signs of easing labor supply and demand tension, uncertainty of economic activities with deteriorating credit conditions, etc. since the middle of 2022, the cumulative effect of monetary tightening and the lag of policy effects are clear, and almost all participants (most all) agree with the fixed policy interest rate.
(2) On the other hand, due to the extremely tight supply and demand of labor, the momentum of economic activity has exceeded previous predictions, and there are clear and foreseeable signs of a return to the long-term 2% inflation target, which can hardly be confirmed. Several participants (some) initially advocated for a 0.25% interest rate.
(3) For the future policy outlook, all participants continue to adopt a tightening policy attitude. Almost all participants are based on SEP and it is advisable to increase interest rates in 2023.
The above content is consistent with the recent speech by the Chairman of the Federal Reserve of the United States, Powell, which showed that when the economy follows SEP's estimated trend, interest rates need to be raised more than twice within the year to bring prices down to the target level. However, there is no specific guidance on the timing of future interest rate hikes, and it is expected that each meeting will be judged based on price and labor-related indicators, which can be confirmed before this. While the economic bottom is being maintained, the tension between labor supply and demand remains unresolved, and concerns about sustained inflation remain unresolved. Therefore, the scope for the Federal Reserve to continue raising interest rates is expanding. We believe that unless there are obstacles to additional interest rate hikes, the likelihood of a resumption of interest rate hikes in July is extremely high.