US Federal Reserve’s message to markets is that aggressive rate hikes aren’t going away

The US Federal Reserve is delivering a hawkish message to markets: We hear you, we see you, but you can’t stop us – aggressive rate hikes aren’t going away, media reports said.

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

They”e also swallowing their medicine – US stocks initially plummeted on Thursday morning as they grappled with new, hawkish comments from Federal Reserve Chairman Jerome Powell on top of a three-quarter point rate hike from the European Central Bank. But by the end of the day, they had shrugged it off and markets closed higher.

The Federal Reserve doesn’t like to surprise financial markets with rate hikes, and so it’s making its intentions fairly clear, CNN reported.

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 pain their hiking policy could inflict and then reiterated that for the time being they would keep on with their aggressive regime to fight pervasively high inflation rates.

At a think tank conference on Thursday, Powell reiterated his position on staying the course.

“History cautions strongly against prematurely loosening policy,” he said at the Cato Institute’s 40th Annual Monetary Conference. “I can assure you that my colleagues, and I are strongly committed to this project and we will keep at it until the job is done.”

His comments echoed Fed vice chair Lael Brainard’s, who spoke at a banking policy conference in New York on Wednesday. “It is especially important to guard against the risk that households and businesses could start to expect inflation to remain above 2 per cent in the longer run,” she said, CNN reported.

Goldman Sachs, Bank of America and Nomura analysts all used this week’s messaging as reason to raise their forecasts for the next Fed policy decision on September 21 from a half point hike to three-quarters of a point, CNN reported.

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