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Fed Turns Very Hawkish On Inflation, Markets Turn Bullish?

S&P 500 Futures are very BULLISH this morning and up over 18 points. Jake Sullivan said the White House will soon announce a deal to supply European Liquified Natural Gas in order to increase its dependency on Russia. The State Department reports that the Russian Foreign Ministry expelled several American diplomats in retaliation.

Jamie Dimon was reported as having urged the White House to invest more in domestic gas infrastructure.

Loretta Mester of the Federal Reserve Bank of Cleveland stated that she believes the economy in the United States is strong, and supports raising the interest rate to 2.5% by the end of the year.

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Federal Reserve policymakers on Wednesday signaled they stand ready to take more aggressive action to bring down unacceptably high inflation, including a possible half-percentage-point interest rate hike at the next policy meeting in May.

“I have everything at my disposal right now. At an event hosted by Bloomberg, Mary Daly, President of the San Francisco Fed, stated that 50 (basis points) is all we have to do. “”With the strong labor market, everyone is concerned about inflation, inflation and inflation.”

Daly has been cautious in tightening the policy. She is showing a growing urgency in accepting a higher-than-usual increase to the rate at the May meeting.

According to Bullard the president of St. Louis Fed Accelerating Inflation “has required, I believe, all of us, to think more about what speed they’re going have to go in order for inflation to be under control,” Bullard told the Mid-Size Bank Coalition of America. “We need to think bigger than we have in the past.”

Bullard is the lone dissenter in the U.S. central bank’s decision of March 16, to increase the overnight benchmark rate from its near zero level to 25%. Bullard said a half-percentage-point hike was appropriate to kick off the tightening cycle and he wants the policy rate to rise to 3% this year.

Bullard’s not the only one who supports more aggressive actions. This is particularly true, given the perception that rising commodity prices due to Russia’s invasion in Ukraine will not only worsen inflation but also slow down economic growth.

Jerome Powell – Fed Chair – stated this week that after the hike in interest rates last week, the central banks would act quickly to raise rates. He left the door wide open for an even bigger increase in borrowing costs to be announced at the May Meeting.

Last week’s Fed Most policymakers expected that the policy rate would rise to 1,9% by the end the year.

Loretta Mester said that she wanted to do some of the work in advance. She was asked about the direction interest rates would be going this year. To be prepared for what happens in the second part, it is best to start sooner rather than to wait.

Mester wants the federal funds rate at 2.5% by the end the year. This level would not be a braking or boosting rate and would need to be adjusted. “some” Rates to increase by 50 basis points

Markets have taken that view on board, with traders pricing in two half-percentage-point hikes in coming meetings, and a year-end policy rate range of 2.25%-2.5%.


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