Fed: pivot or no pivot?

(Boursier.com) — Fed officials continue to push back hopes of an accommodating “pivot” on rates, ie a reversal of the movement on rates from tightening to monetary easing. Fed Governor Michelle Bowman said further rate hikes of 75 basis points should be considered until inflation declines steadily. Bowman still hasn’t seen concrete indications that inflation has peaked, noting a significant risk that high inflation will persist through 2023 for basic necessities like housing and food.

Separately, San Francisco Fed President Mary Daly (non-voting) reiterated remarks that the Fed was “off the mark” in reducing inflation. Daly suggested that a 50bp hike in September was therefore not the only option. She had previously claimed that a 50bp hike in September was “reasonable”. Bowman and Daly said they would be guided by incoming data, but both place a higher priority on reducing inflation.

The current range on the federal funds rate is 2.25 to 2.5%, after two increases of 75 basis points. According to the FedWatch tool, the probability of an additional 50 basis point hike on September 21, at the next monetary meeting, is 29.5%, compared to a 70.5% chance of a 75 basis point hike. basis (between 3% and 3.25%).