The Fed expects to raise interest rates three to four times in the future, leaving them unchanged in October - former adviser to the US Treasury secretary

[New York Current Affairs] In an interview on the 23rd, Joseph LaBonna, chief economist of Sumitomo Mitsui Banking Corporation in the Americas and an advisor to U.S. Treasury Secretary George Bensent, said that he believes the Federal Reserve will raise interest rates three to four times in the future. On the other hand, the Bank predicted that interest rates would be left unchanged at the next policy meeting in October, just before the US midterm elections.

US Federal Reserve becomes more hawkish, focuses on October interest rate hike, long-term interest rate rise

At the Federal Open Market Committee (FOMC) meeting on the 16th of this month, the Federal Reserve decided to raise its policy interest rate for the first time in about three years in an effort to curb inflation. LaBonna said this one round would not change anything in the financial environment, and expected additional FOMC meetings at least in December and in January and March of next year. He said that depending on the economic situation, it may continue into April.

Market speculation has emerged that the central bank will raise interest rates at its next meeting on October 27th and 28th due to inflation concerns. However, LaBonna speculates that Chairman Warsh was able to raise interest rates unanimously this month because he suggested to some senior officials who were reluctant to tighten the economy, ``Let's raise rates first and see if inflation subsides.'' He said that under such circumstances, it would be difficult to move to raise interest rates continuously.

The analysis also said that with President Trump calling for interest rate cuts, a decision to raise interest rates just days before the midterm elections to be counted on November 3 could be a "provocation to the White House." To avoid political tensions, he predicted that the October meeting would be postponed unless a sharp acceleration in inflation was confirmed.

Mr. Bessent's coordinated intervention with Japan to buy the yen and the buyback of government bonds aimed at suppressing the rise in US long-term interest rates are evaluated as ``two wins, one win.'' Although there has been some success in correcting the yen's depreciation, the yield on 10-year U.S. Treasuries, an indicator of long-term interest rates, is well above 5%, "which is probably too high compared to the level that Mr. Bessent would like," he said.

La Bogna has been in his current position since March after serving as an advisor to Bessent during the second Trump administration. During the first administration, he held important positions such as special assistant to the president.