Wire flash
BNP Paribas: Fed's September rate hike more likely a 'preventive' move, not start of new tightening cycle
Editorial responsibility
- No named human review is recorded for this page.
- Source reporting is collected, normalized, translated or condensed automatically when needed.
- Automatically published source-backed update
Chi Lo, a strategist at BNP Paribas, argues that a potential Federal Reserve rate hike in September is unlikely to mark the start of a new tightening cycle similar to 2022-2023. Instead, he suggests it could be a 'preventive hike' aimed at reversing last year's three rate cuts to bring inflation back to target. Lo notes that further rate increases would not resolve external shocks like war and energy price inflation but could alleviate financial market concerns about the Fed's anti-inflation credibility. He warns that the Fed cannot ignore persistent or unexpected shocks. However, by slowing activity in other sectors of the economy to curb inflation, further rate hikes also risk pushing the economy into stagflation.
Source report
Chi Lo, a strategist at BNP Paribas, has stated that while the market anticipates two more rate hikes, a September increase by the Federal Reserve is unlikely to signal the beginning of a new tightening cycle similar to that of 2022–2023.
Instead, Lo suggests the move may mark the start of a "preventive rate hike" phase, aimed at bringing inflation back to target levels by reversing the three rate cuts implemented last year.
According to Lo, further rate increases will not resolve external shocks such as war-related disruptions or energy price inflation. However, they could ease financial market concerns regarding the Fed's credibility in fighting inflation. He noted that the Fed cannot continue to overlook recurring shocks or those that fail to subside as expected.
Nevertheless, Lo cautioned that additional rate hikes carry the risk of pushing the economy into stagflation, by slowing activity in other sectors in an effort to curb inflationary pressures.
For more exclusive analysis and expert commentary, visit the Stock Channel. Editor: Lishu
Source
金融界Neutral / independent
Part of this Story
BNP Paribas: Fed September rate hike likely preventive, not start of new tightening cycle