BNP Paribas: Fed's September rate hike likely 'preventive', not start of 2022-2023-style tightening cycle
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According to a report by Caixin (CLS) on September 28, BNP Paribas strategist Chi Lo stated that the Federal Reserve's September rate hike is unlikely to mark the beginning of a new tightening cycle similar to 2022-2023. Instead, Lo suggests it may signal the start of 'preventive rate hikes' aimed at bringing inflation back to target by reversing last year's three rate cuts. Lo argues that further rate hikes will not resolve external shocks such as war and energy price inflation, but could ease financial market concerns about the Fed's anti-inflation credibility. He notes that the Fed cannot continue to ignore recurring or persistent shocks. However, Lo warns that additional rate hikes, by slowing activity in other parts of the economy to curb inflationary pressures, also risk pushing the economy into stagflation.
Source report
September 28 — According to Chi Lo, a strategist at BNP Paribas, the Federal Reserve's September rate hike is unlikely to mark the beginning of a new tightening cycle similar to that of 2022–2023, despite market expectations of two additional rate increases.
Instead, Lo suggests the move may signal the start of "preventive rate hikes," aimed at bringing inflation back to target by reversing last year's three rate cuts.
Key points from the strategist's analysis:
- Further rate hikes will not resolve external shocks such as war-related inflation or energy price increases.
- However, they could ease financial market concerns about the Fed's credibility in fighting inflation.
- The Fed cannot continue to overlook recurring shocks or those that fail to subside as expected.
- At the same time, additional rate hikes carry the risk of pushing the economy into stagflation by slowing activity in other sectors to curb inflationary pressures.
Source
财联社Eastern
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BNP Paribas: Fed September rate hike likely preventive, not start of new tightening cycle