Several reports detail that US Federal Reserve officials are determined to tighten monetary policy and raise the federal funds rate until inflation in America subsides. Chicago Fed Chairman Charles Evans said Tuesday that the central bank is likely to stick with bigger-than-usual rate hikes until inflation is corrected.
Fed ‘far from done’ on policy tightening, central bank hasn’t seen ‘turnaround in inflation’
The Federal Reserve is in a difficult situation because inflation in the United States is the The highest it’s since the 1980s. On Tuesday, a report quoting three members of the US central bank indicates that Fed policymakers are still convinced that more rate hikes are needed to bring the country’s rising inflation under control.
San Francisco Fed President Mary Daly explained during a Linkedin interview “we are still resolute and completely united” to bring down inflation. Ms Daly pointed out that the Fed was “far from done” when it came to implementing monetary policy measures and in terms of fighting inflation she said the central bank still had “a long way to go “.
“My modal view, or the view that I think is most likely, is really that we raise interest rates and then hold them for a period of time at whatever level we think is appropriate,” Daly remarked. Cleveland Fed President Loretta Mester’s opinion was similar, as she Told The Washington Post (WP): “We still have some work to do because we haven’t seen this inflation move.”
Chicago Fed President Charles Evans also shared his opinion on Tuesday. Evans Explain reporters that the Fed would likely continue to raise interest rates sharply until inflation subsides. While talking about bigger than usual rate hikes in the 75 basis point range, Evans also clarified that a 50 basis point rate hike could still happen.
“If you really thought things weren’t getting better… 50 bps is a reasonable valuation, but 75 bps might be fine as well. I doubt more is needed,” Evans said. Amid hawkish statements from Fed members on Tuesday afternoon (EST), cryptocurrencies, stocks and gold markets lost value. The US dollar, on the other hand, has reinforced against the Japanese yen and other major fiat currencies after a brief pullback.
Volatility hits stocks, gold and cryptocurrencies
At Tuesday’s closing bell, all major stock indices were down, including the Dow Jones Industrial Average, Nasdaq, NYSE and S&P 500. Cryptocurrency markets also lost gains and market capitalization sits just above $1.13 trillion. bitcoin (BTC) slipped below $23,000 per unit area and Ethereum (ETH) fell less than $1,600 per coin on Tuesday.
During the day on Tuesday, both major crypto assets managed to rally above these regions. The following day, August 3, the entire crypto economy grew by just over 2%. Stocks and the crypto-economy have started to show a bit more volatility as tensions rise between China and Taiwan. Gold is also down this month, as one ounce of fine gold traded for $1,810 per unit on July 1, and today gold is trading for $1,765 per unit.
Analysts say the recent fall in gold is due to a strong US dollar as the DXY Index charts show that the greenback remains robust after its fall last week. “Gold pared gains after Wall Street grew optimistic that tensions between the world’s two largest economies would spin out of control,” Edward Moya, senior market analyst at OANDA, told Kitco News. “A strong dollar is also weighing on gold, as the greenback’s pullback over the past two weeks appears to be over.”
What do you think of the statements of the various members of the Fed and the reaction of the markets following the warmongering comment and the tensions between China and Taiwan? Let us know what you think about this topic in the comments section below.
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