Several officials from the Federal Reserve have continuously released hawkish signals.

Source: Jin Ten Data

The President of the New York Fed, John Williams, stated on Thursday local time that U.S. inflation remains too high, and the Federal Reserve needs to take further action to ensure that prices continuously return to the 2% policy target.

During an event in New York that evening, Williams said, "The level of inflation is far too high. Even based on the latest released data, it remains elevated. We need to take appropriate measures over the next period to ensure that inflation returns to the 2% target level in a timely and sustained manner."

However, he also emphasized that the Federal Reserve must avoid causing unnecessary damage to the goal of full employment. He believes that overall, the U.S. economy does not seem to show signs of imbalance at present.

The Federal Reserve implemented its first interest rate hike in three years in September and then decided to maintain interest rates in October to await more economic data. Subsequently, officials gradually formed a broad consensus: to curb persistently high inflation, interest rates still need to be further raised, but there remains disagreement internally regarding the specific magnitude and pace of rate hikes.

Inflation data strengthens rate hike expectations, officials have differing views on pace

Williams indicated that the Federal Reserve had already decided in September to further understand economic trends by assessing subsequent economic data before deciding on monetary policy at the next meeting.

He said, "We will continue to advance according to this process."

However, he believes that recent released data has sent a quite clear signal: the U.S. economy remains strong, the labor market continues to strengthen, while inflation remains stubborn.

Williams stated, "To bring monetary policy back to an appropriate position, we still have a lot of work to do."

The U.S. October inflation report released on Tuesday showed that the core Consumer Price Index (CPI), excluding food and energy prices, rose by 0.3% month-on-month, exceeding market expectations for the third consecutive month.

This report further reinforced the judgment that the Federal Reserve needs to continue tightening policy. Chicago Fed President Austan Goolsbee described it as "disturbingly critical."

However, Federal Reserve officials still have differing views on the magnitude of interest rate hikes. Philadelphia Fed President Anna Paulson stated this week that "further gradual tightening of monetary policy currently seems appropriate."

In contrast, Federal Reserve Governor Christopher Waller left room for larger interest rate increases. He previously stated that if the October inflation data exceeded expectations, the Federal Reserve might consider a one-time rate hike of 50 basis points as early as December, rather than the usual 25 basis points. The subsequent inflation data indeed exceeded expectations.

Interest rate futures bet on three consecutive rate hikes

Currently, the market's expectations for the Federal Reserve's subsequent policy path have clearly shifted to a hawkish stance.

Interest rate futures show that investors expect the Federal Reserve to raise rates by 25 basis points at the next three meetings (December, January next year, and March).

Williams is a centrist on the Federal Reserve's monetary policy committee, and his statements regarding economic conditions and interest rate policy have always been closely watched by the market, sometimes even directly affecting financial market trends.

Especially after Federal Reserve Chairman Kevin Warsh reduced public discussions about the economic situation and future interest rate trends, Williams' policy statements have received more attention from investors.

As inflation continues to exceed expectations, the policy pressure facing the Federal Reserve is increasing. Moving forward, the market will focus on whether other officials further support consecutive rate hikes and whether the economic data released before the December meeting can reinforce this policy path.

Several officials from the Federal Reserve continuously release hawkish signals!

San Francisco Fed President Mary Daly stated on Thursday that to lower inflation, the Federal Reserve may need further interest rate increases.

Daly made this statement at an event held at Stanford University's Institute for Economic Policy Research in California, saying, "My inclination is that further tightening of monetary policy will be necessary, as we see inflation continuing to face pressure, and this pressure is not just coming from the industries most directly affected by tariffs or oil prices."

She noted that she is hearing more and more businesses stating that due to rising input costs, they will have to pass on the higher costs to consumers.

Daly also discussed the impact of artificial intelligence and its future development prospects.

She stated that there is no doubt that AI infrastructure construction is pushing price pressures higher, but currently, the overall impact on inflation remains limited, as the associated cost increases are not large enough and have not spread to other areas.

Daly stated, "This only indicates that the factors currently driving overall inflation upward are other elements, not AI-related products."

She reiterated her optimistic view on the long-term impact of artificial intelligence driving faster productivity growth, but it is still too early to judge when this effect will truly manifest.

Daly does not have a voting right on monetary policy this year, but she reiterated her support for the interest rate decisions previously made by the Federal Reserve.

Also on Thursday, Chicago Fed President Austan Goolsbee, Cleveland Fed President Beth Hammack, and Kansas City Fed President Jeff Schmid also expressed their concerns about the persistence of high inflation.

Hammack, while attending an event in Columbus, Ohio, stated, "My expectation is that we need to shift monetary policy to a restrictive stance to help inflation decline." She mentioned that if the Federal Reserve falls behind the situation in combating inflation, officials could consider taking more aggressive actions, but she does not currently believe it is necessary to do so.

Goolsbee, in an interview with Yahoo Finance, stated that AI infrastructure construction may be exacerbating inflationary pressures in the economy, placing the Federal Reserve in a phase where inflation is more difficult to reduce.

Schmid stated that the Federal Reserve has not yet overcome the enemy of inflation.