Fed to Raise Interest Rate by 0.75%P in November... Will Discuss Pace Adjustment in December

[Asia Economy New York=Special Correspondent Joselgina] The U.S. central bank, the Federal Reserve (Fed), carried out the expected giant step (a 0.75 percentage point increase in the benchmark interest rate) in November, and there are expectations that it will discuss slowing the pace of rate hikes in December. The New York stock market immediately rebounded on hopes of a slowdown.

The Wall Street Journal (WSJ) reported on the 21st (local time) that the Fed is expected to carry out a fourth consecutive giant step at the Federal Open Market Committee (FOMC) regular meeting scheduled for November 1-2. WSJ also predicted that the Fed will consider raising interest rates by a smaller margin in December.

This view contrasts with the recent market consensus that had been leaning toward five consecutive giant steps through December, suggesting instead that the Fed will slow the pace. This argument is based on concerns that excessive monetary tightening could cause unnecessary economic slowdown.

WSJ pointed out, "At this FOMC regular meeting, the Fed must decide whether to raise the benchmark interest rate by only 0.5 percentage points in December, and if so, how to explain to the market that this action does not represent a retreat in the fight against inflation." This is because, as seen when Fed Chair Jerome Powell’s July press conference was interpreted dovishly, he had to express a strong tightening stance at the August Jackson Hole speech to avoid sending the wrong signals to the market.

Accordingly, WSJ mentioned that the Fed might decide on a 0.5 percentage point rate hike at the December FOMC while raising the benchmark rate projections on the dot plot.

It has been reported that there are differing opinions within the Fed regarding the pace adjustment. Hawkish figures, including Loretta Mester, President of the Cleveland Federal Reserve Bank, have publicly suggested consecutive giant steps in November and December. On the other hand, Vice Chair Lael Brainard and others have expressed concerns about the size of rate hikes after December.

Meanwhile, the 10-year Treasury yield surged to 4.337% during the morning session, marking the highest level since November 2007, but fell to 4.219% after reports of a possible slowdown. The three major indices of the New York stock market were all up 2.3% to 2.4% compared to the previous session as the afternoon session neared closing.

This content was produced with the assistance of AI translation services.