Inflation Deemed Worsening, Fed Sends Hawkish Signal to Market
Recent statements from Federal Reserve officials reiterated that inflationary pressures are not yet fully under control. Austan Goolsbee and Beth Hammack stated that current inflation has entered the "orange" level, potentially worsening, especially amidst the surge in energy prices stemming from the Middle East conflict.
These comments reflect concerns that inflation will not only persist for longer but could also rise again if energy-related pressures persist. In a Reuters report, the two officials assessed that inflation is currently a greater concern than labor market conditions, which have long been a leading indicator of US economic health.
Rising oil prices, which have already reached above $110 per barrel, increase the risk of global inflation, reinforcing the view that central banks will likely maintain tight monetary policy for longer. In such a situation, the chances of an interest rate cut in the near future are diminishing, and markets are even starting to consider the possibility of a hawkish policy stance until the end of the year.
The impact was immediately felt in global financial markets. The US dollar tended to remain strong, supported by expectations of high interest rates, while assets like gold faced pressure due to their lack of yield. However, geopolitical tensions continue to support safe-haven demand, limiting gold's movement and tending to move sideways.
Overall, the Fed official's statement clarified the direction of future policy: the primary focus remains on controlling inflation, even though risks to economic growth are starting to increase. This means that the market is currently facing not only geopolitical uncertainty but also monetary policy pressures that could potentially persist longer than previously expected. (Zaf)
Source: Newsmaker.id
