Still, no Fed official who’s spoken since the May 4 policy meeting has expressed concern about the market volatility or the state of the US economy.
For her part, Treasury Secretary Janet Yellen, came close to endorsing the dollar’s climb toward 2020 crisis-level highs. The greenback is being pushed higher by rising US rates, “and in a way that’s part of how a tighter monetary policy works,” the former Fed chair said last Wednesday. On Tuesday, New York Fed President John Williams that the US unemployment rate could climb from the current 3.6%, it wouldn’t be “in a huge way.”
Citigroup Inc. economists warned against any conclusion that Fed policy makers are currently hitting their peak hawkishness, as strategists from JPMorgan Chase & Co. have suggested. There’s a potential for a ramp-up in the so-called terminal rate -- the endpoint for the policy benchmark for the cycle.
Peak Still Pending
That might not come until September, if core inflation proves sticky and it’s evident the central bank has significantly more work to do, the bank’s team wrote in a Tuesday note. The Fed is expected is deliver two more 50-basis points hikes at its next two meetings, swaps pricing shows.
“Financial conditions have tightened rapidly, causing some to speculate that we are at the moment of ‘peak hawkishness,”’ Citigroup economists led by Andrew Hollenhorst wrote. “That is a possible outcome, but not a likely one given the trajectory of inflation,” they wrote. “We continue to see risks as balanced toward a further hawkish move from the Fed.”
This article was provided by Bloomberg News.