U.S. Federal Reserve backs off October interest rate hike, high-ranking officials strengthen communications on behalf of chair

[Washington Current Affairs] In the U.S. financial market, there is growing speculation that the Federal Reserve will postpone further interest rate hikes at its monetary policy meeting later this month. This is because multiple Federal Reserve officials have expressed the view that there is "no need to rush" with regard to further tightening (New York Federal Reserve Bank President Williams). While Chairman Warsh maintains a stance of not hinting at interest rate trends, the aim is to prevent the market from falling into skepticism by having high-ranking officials proactively communicate policy outlooks on behalf of the chairman.

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Director Waller, who has a reputation for economic analysis, emphasized that ``there is no need to raise interest rates continuously.'' This month's additional tightening has been cancelled. Vice Chairman Jefferson also stated that ``further policy adjustments should be decided carefully,'' indicating that he would closely monitor economic indicators. Since the employment situation is relatively stable, the Federal Reserve plans to focus on the September Consumer Price Index (CPI), which will be announced on the 14th, in making monetary policy decisions.

Financial giant Wells Fargo predicts that the CPI will rise 3.7% from the same month last year, an acceleration of growth from the previous month's 3.4% rise, due to high oil prices caused by the worsening situation in the Middle East.

However, the growth rate of the core index, which excludes highly volatile energy and food items, is expected to be 2.4%, the same level as last month. The Bank expects interest rates to remain unchanged at this month's meeting, saying that underlying inflationary pressures will remain "subdued."

In the interest rate futures market, the probability that the Federal Reserve would raise interest rates this month was at one point as high as 70%, but it has fallen to just under 20% following comments from senior officials. The extent to which interest rate hikes have been factored in has changed rapidly due to the ``adverse effect'' (according to economists) of Mr. Warsh's stubborn refusal to provide any guidance on the future direction of policy.

Even within the Fed, there are concerns that ``the market will price in either an extremely low number of interest rate hikes or an extremely high number of rate hikes'' (Waller) regarding the method of not showing interest rate trends at all.