Fed Officials to Markets: You Can’t Stop Us – CNN | Jewelry Dukan


new York
CNN business

The US Federal Reserve is sending a hawkish message to markets: We hear you, we see you, but you can’t stop us – aggressive rate hikes won’t go away.

Wall Street seems to be listening. Markets now see an 86% chance of a three-quarter point hike at the September Fed meeting, according to CME Group.

They’re taking their medicine, too — US stocks initially tumbled Thursday morning as they grappled with fresh hawkish comments from Federal Reserve Chair Jerome Powell on top of a three-quarter-point rate hike by the European Central Bank. But by the end of the day, they had shrugged and markets closed higher.

What’s happening: The Federal Reserve doesn’t like surprising financial markets with rate hikes, so it’s making its intentions pretty clear. At least eight Federal Reserve officials spoke publicly during this week’s media blitz, and they delivered similar lines.

One by one, officials acknowledged the economic and market-related pain their migration policies could cause, then reiterated that they would stick to their aggressive regime for now to combat pervasively high inflation rates.

At a think tank conference Thursday, Powell reiterated his position to stay the course.

“History warns strongly against premature policy easing,” he said at the Cato Institute’s 40th annual monetary conference. “I can assure you that my colleagues and I are very committed to this project and will stick with it until the job is done.”

His comments echoed those of Fed Vice Chairman Lael Brainard, who was speaking at a banking policy conference in New York on Wednesday. “It is particularly important to guard against the risk that households and businesses could start to keep inflation above 2% for longer,” she said.

Exchange rate: Analysts at Goldman Sachs, Bank of America and Nomura all used this week’s news as a reason to upgrade their forecasts for the Fed’s next monetary policy decision on Sept. 21 to three-quarters of a point from half a point.

The data shows that the economy has made strides towards achieving the soft landing that the Fed is hoping for. Core and headline inflation were weaker in July, commodity prices are falling, the dollar is strong and supply chain kinks are improving. The labor market is showing signs of slowing down and GDP growth is also slowing.

But Fed officials have indicated that this is not enough. “Fed officials have been sounding hawkish lately and seem to be implying that progress in taming inflation has not been as smooth or as rapid as they would like,” wrote Goldman Sachs researchers, led by chief economist Jan Hatzius on Thursday in a note.

Known unknowns: Nothing is set in stone and a set of economic and inflation data to be released later this month will guide the Fed’s next moves. Should CPI surprise on the downside next week, the Fed could consider a less aggressive rate hike.

“Although we move to a 75 basis point rate hike in September, we recognize that a smaller 50 basis point hike poses risks,” Bank of America analysts wrote. “The Fed has received some negative feedback on its messaging during the recent blackout period, and participants may feel it is time to move away from effective advance notice of policy rate moves.”

The death of Queen Elizabeth on Thursday has plunged the UK into a time of national mourning for the country’s longest-reigning monarch.

This official period of reflection comes at a time of political and economic transition for the UK economy. It has been less than a week since Liz Truss was sworn in as the country’s prime minister, and the economy is struggling amid rising inflation rates, war-induced raw material shortages in Ukraine and an imminent energy crisis.

Financial institutions, meanwhile, are struggling to figure out how to pay their respects to the Queen while keeping more economic chaos at bay. The Bank of England delayed its next rate decision, due on September 15, by a week.

The London Stock Exchange, on the other hand, wants to continue at full speed. The day of the Queen’s funeral is expected to be a public holiday, in which case the London Stock Exchange would be closed for trading, but “it is expected to remain open for trading as usual during the official mourning period,” a spokesman told CNN .

The UK government on Thursday confirmed plans to subsidize household and business energy bills to protect its economy from a freeze this winter, my colleagues Lauren Kent and Anna Cooban report. The plan could cost as much as $172 billion, according to analysts, but it’s badly needed. Already this year, the average annual household energy bill is up 54% to $2,263.

Former President Donald Trump has yet to go public. But he lives to fight another day.

Blank check firm SPAC, which plans to merge with Trump’s new media company and list it publicly, rallied shareholder support Thursday to extend the deadline for the merger agreement to Oct. 10, my colleague Matt Egan reports.

SPACs – or publicly traded shell companies formed to acquire or merge with a private company and take it public – typically have two years to find a company to acquire, before owners have to return funds to investors.

Digital World Acquisition’s plan to merge with Truth Social’s owner, Trump Media & Technology Group, has been halted by federal investigations, revealing the fate of the $1.3 billion in cash raised as part of the IPO of the company and Trump Media’s IPO, left in heaven.

Digital World has repeatedly delayed the merger, and shareholders didn’t seem ready at first to kick the can out on the street again, reports my colleague Matt Egan. Ultimately, they came to the decision.

The merger agreement was also held up over allegations that Trump Media owed a contractor more than $1 million.

Trump shrugged off the controversy and hinted that he didn’t plan to go public in a Truth Social post on Saturday. “In any case, I don’t need financing, ‘I’m really rich!’ Private company anyone???” The former president wrote in his typical posting style.

Kroger reports result before the bell.

Also today →

▸ European Union officials meet to discuss energy crisis

Leave a Comment