Macroscope | Why a Fed pivot on interest rates is just wishful thinking
- Market talk that interest rates could peak soon is just talk. With US inflation still elevated and the jobs market holding up, the Fed has no reason to stop the hikes
- Even if it is closer to the end of its hiking cycle than it is to the beginning, it is likely it would want to linger at the top of its hiking cycle before it starts to cut rates
At this point, it is quite safe to say there are plenty of pivots by dancers in the Hong Kong Ballet, but no signs of any by American central bankers.
“If the US continues to raise interest rates, it is expected that the Hong Kong dollar interbank rates will continue to rise,” he said in a statement. “The public should be prepared for the commercial interest rates to rise further, and carefully assess and manage the relevant risks when making property purchases, mortgages or other borrowing decisions.”
This is sound advice because, as suggested by a broad sweep of recent United States economic data, there is every chance that the Fed will not only hike interest rates again next month, but also move yet again on February 1.
The bottom line is that US consumer price inflation continues to be elevated, sticky, and certainly way above the Fed’s 2 per cent target. The core personal consumer expenditures price index, a figure which Fed chair Jerome Powell directly cited in the post-rate hike press conference last week, was 5.1 per cent year-on-year in September, still impervious to the US central bank’s monetary policy tightening to date.
