The possibility of an additional interest rate hike by the U.S. Federal Reserve is increasing, raising tensions in global financial markets. As Fed officials continue to warn about persistently high inflation, market sentiment is leaning toward expectations of a rate increase in December. The potential for prolonged high interest rates could also impact domestic financial markets and funding conditions.
According to the International Financial Center on November 9, the Chicago Mercantile Exchange (CME) FedWatch has indicated a 78% probability of a rate hike in December.
Several key Fed officials have made hawkish statements. Mary Daly, president of the San Francisco Federal Reserve Bank, recently stated that inflation remains high and additional rate hikes are necessary. Alberto Musalem, president of the St. Louis Fed, emphasized the importance of lowering prices. John Williams, president of the New York Fed, also assessed that inflation is excessively high.
The direction of future monetary policy will largely depend on U.S. inflation indicators. Attention is focused on the Consumer Price Index (CPI) for October, which is set to be released on November 10. The market anticipates that the October CPI will rise by 3.9% compared to the same month last year, up from 3.7% in the previous month. However, the month-over-month increase is expected to slow to 0.3%, down from 0.6% in the prior month. Core CPI is also projected to rise by 2.8% year-over-year, but the month-over-month increase is estimated to be only 0.2%.
There are speculations that the outlook for a December rate hike could change depending on inflation trends. Bloomberg Economics has suggested that if the October CPI and other upcoming economic indicators underperform expectations, the Fed may decide to hold the benchmark interest rate steady in December.
The uncertainty surrounding U.S. monetary policy poses challenges for domestic financial markets. An increased likelihood of U.S. rate hikes could lead to a stronger dollar and shifts in global capital flows. Particularly, if market interest rate volatility expands, it could affect funding costs for financial institutions, including bank bonds, and raise interest rates on loans, drawing attention to how domestic financial companies will respond.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.