International Forex News - August 11

Probability of a 25 bp Fed Rate Hike in September Stands at 51.2%

On August 11, according to CME FedWatch: the probability that the Federal Reserve will keep interest rates unchanged in September is 48.8%, while the probability of a cumulative 25 bp rate hike is 51.2%. By October, the probability that the Fed will keep rates unchanged is 34.7%, the probability of a cumulative 25 bp rate hike is 50.5%, and the probability of a cumulative 50 bp rate hike is 14.7%.

Trump Says He Has Spoken Briefly with Warsh Only Once Since Warsh Took Office, Denies Frequent Communication

On August 11, U.S. President Donald Trump said on Monday that he has had only one “brief” conversation with Federal Reserve Chair Kevin Warsh since Warsh took office, denying claims that the two have communicated frequently. White House National Economic Council Director Kevin Hassett said last week that the two “often discuss economic issues,” but other people familiar with the matter said the calls were irregular and not frequent. Earlier reports said that since Warsh was confirmed as Fed chair in May, Trump had communicated with him several times and had asked Warsh for forecasts and views on the economic outlook. Trump again expressed his desire for lower interest rates, but said he “100% supports” Warsh and emphasized that Federal Reserve policy is decided collectively by the Board.

Fed’s Hammack: Multiple Rate Hikes May Be Needed to Bring Inflation Down

On August 11, Cleveland Fed President Hammack said that inflation has still not returned to target and that the Federal Reserve may need to raise rates multiple times. She said a single 25 bp rate hike “would not have much impact on the economy,” but she was unwilling to prejudge the exact number of rate hikes or the terminal rate level. Hammack believes the current 3.50%-3.75% rate range is not clearly restrictive for the economy, as companies have not reduced growth investment because of high rates, so “now is the time to act.” She said the longer the Fed waits, the harder it will be to bring inflation back to 2%. Hammack also stressed that there are currently no obvious problems in the labor market, and July employment data will not change her focus on inflation. She believes markets can only assist the Fed and cannot replace Fed action. Hammack opposed keeping rates unchanged at the Fed’s July policy meeting and favored a 25 bp rate hike.