Senior Fed officials have stated that there are still big obstacles to any monetary policy tightening because Chairman Jay Powell and his inner circle are trying to stabilize the Fed’s information after nearly a week of adjustments. Market volatility.

In a series of interventions, senior Fed officials this week dispelled concerns Some investors, Even LegislatorIn view of the rapid improvement in the economic outlook, they are preparing to raise interest rates faster than expected.

Instead, they emphasized their belief that the current surge in US inflation is temporary, their firm commitment to full employment, and their cautious attitude in withdrawing support for the recovery.

“We will not raise interest rates preemptively because we think the employment rate is too high [or] Because we are worried about possible inflation,” Powell said at a meeting Congressional hearing Tuesday. “Instead, we will wait for actual evidence of actual inflation or other imbalances.”

The relatively dovish comments of the Fed leadership became necessary after the introduction of a new round of policies. Economic forecast Last week, U.S. central bank officials pointed out that interest rates will be raised by two levels in 2023, compared with zero expectations three months ago.

Although the Fed cheered the brighter prospects for recovery and said it was ready to start discussing whether to slow down its bond purchases, it did not imply that interest rate hikes were imminent.

San Francisco Fed President Mary Daly told reporters on Tuesday: “Talking about interest rate changes is not even on the table.” “The mantra now is: Be steady.”

Fed leadership teamed up to clarify the facts

This Reassuring tone Initially set by New York Fed President John Williams (John Williams) on Monday, he said that the data has not “progressed” enough to warrant a policy change. This is in sharp contrast to the remarks made by St. Louis Fed President James Brad at the end of last week, who hinted that interest rates might be raised as early as next year.

The combined remarks of Williams, Powell and Daley have given a sigh of relief to investors struggling in the context of financial market turmoil in recent days.

After the Fed meeting last week, the US stock market fell sharply, the US dollar rose along with government bonds, and market indicators of inflation expectations fell as Wall Street weighed the Fed’s prospects of becoming more aggressive in response to rising consumer prices.

On Tuesday, the high-tech Nasdaq Composite Index climbed to a new high, the U.S. dollar stabilized, and the five-year breakeven ratio-a measure of investor inflation expectations-rose slightly to 2.5%. It fell below 2.4% on Friday.

The benchmark 10-year US Treasury note also gave up some of its previous gains, closing at 1.46% after Powell’s speech.

Brian Nick, chief investment strategist at Nuveen, attributed the reversal to the Fed’s success this week in affirming its patient approach.

“The Fed’s leadership is working together to clarify its interest rate outlook, or at least point out that it relies more on data than points,” he said, referring to “Dot plot“It shows officials’ forecasts of future interest rates.

“They did a good job of convincing the market. The meeting was not as tough as explained.”

Part of the Fed’s challenge in recent days is to coordinate the higher interest rate forecast for 2023 with the new monetary policy framework introduced last year. The framework promises greater tolerance for inflation above its 2% target, and compensates for periods of lower than expected by finding an average near the target. The framework also promises an “inclusive” definition of labor market tension and encourages employment growth that is beneficial to all sectors of society.

“The Fed’s average inflation target framework has lost some credibility since last week,” said Erik Stein, chief investment officer of fixed income for fund manager Eaton Vance.

“The Fed considers issues from the perspective of risk management. Usually the risk is’inflation will be too low’, so they are dovish. Last week was the first counterattack. [that] With some hawkish information. “

Officials insisted this week that they still deeply accept their new policy framework and reject any ideas they waver. “The market’s response to our framework and its commitment to our framework will be well consolidated,” Daly said. “This will continue to play a role in all our policy decisions. I am very confident about it.”

But even though the Fed’s most senior officials seemed to have stabilized the situation at the beginning of this week, the events since last Wednesday’s meeting have highlighted the pitfalls the Fed may face as the economy enters a new phase.

Kathy Bostjancic, chief American financial economist at Oxford Economics, said: “This is a complicated information transmission and a complicated framework, and it is at a complicated time.”