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George Raises Odds Of Another Dissent At July FOMC

FED
  • Kansas City Fed’s George (’22 voter), having dissented at the June FOMC decision to hike 75bps, has given a speech on “Tightening Monetary Policy in a Tight Economy" that raises the probability that she does so again if the FOMC moves ahead with another 75bp hike later this month.
  • She is sympathetic to the view that rates need to rise rapidly but notes that moving rates too quickly raises oversteering prospects, whilst raising short-term rates faster than long-term rates could invert the yield curve and stress banks.
  • The rate hike and balance sheet cutting pace needs balance vs the economy, with the pace of rate hikes potentially affecting balance sheet run-off.
  • It’s unclear how high rates must go to bring down inflation but she finds recession talk ‘remarkable’ after four months of hikes.
  • Rate hike expectations for near-term meetings have been little changed today at 74bp for Jul and 130.5bp for Sep but growing risk-off has seen declines further out, with a cumulative 184bp over the four meetings to year-end even if that’s still up from the 180bps prior to Friday’s payrolls.
  • Speech: https://www.kansascityfed.org/Speeches/documents/8875/2022-George-MidAmericaLabor-07-11.pdf
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