Golden Finance reported that Mohamed El-Erian, former CEO of Pimco and current president of Queens' College, Cambridge, said that the Fed may not cut interest rates for a 'considerable period' even in the face of unexpectedly high inflation, and may even tolerate higher inflation to protect the economy rise.
Adrian said on Wednesday that if the Fed is truly committed to achieving the 2% inflation target, theoretically it should raise interest rates now. However, the reality is that the Fed is more likely to keep rates unchanged, tolerating higher inflation to preserve economic growth and America's 'exceptionalism.' Due to higher-than-expected inflation in the United States, bond traders have postponed their bets on the Fed's next rate cut until December.
Swap contracts related to the Fed's future decision were repriced after January CPI beat expectations. Previously, the market expected the Fed to cut interest rates by September. The new level of interest rates means that the market is betting that the Fed will cut rates by only 0.25 percentage points this year.
In response to the January CPI data, Erian admitted: "On the surface, this is not good news for the Fed. They will continue to reassure the market that everything will be fine, but I think the pause button will be held longer than the market expects. ”
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Economists: The Fed will pause interest rate cuts for a long time and theoretically should raise interest rates.
Golden Finance reported that Mohamed El-Erian, former CEO of Pimco and current president of Queens' College, Cambridge, said that the Fed may not cut interest rates for a 'considerable period' even in the face of unexpectedly high inflation, and may even tolerate higher inflation to protect the economy rise. Adrian said on Wednesday that if the Fed is truly committed to achieving the 2% inflation target, theoretically it should raise interest rates now. However, the reality is that the Fed is more likely to keep rates unchanged, tolerating higher inflation to preserve economic growth and America's 'exceptionalism.' Due to higher-than-expected inflation in the United States, bond traders have postponed their bets on the Fed's next rate cut until December. Swap contracts related to the Fed's future decision were repriced after January CPI beat expectations. Previously, the market expected the Fed to cut interest rates by September. The new level of interest rates means that the market is betting that the Fed will cut rates by only 0.25 percentage points this year.
In response to the January CPI data, Erian admitted: "On the surface, this is not good news for the Fed. They will continue to reassure the market that everything will be fine, but I think the pause button will be held longer than the market expects. ”