BNP Paribas: Fed unlikely to repeat 2022-2023 rate hike cycle

BlockBeats news, September 28 - BNP Paribas strategist Chi Lo stated that although the market expects two more rate hikes, the Federal Reserve's September rate hike is unlikely to mark the beginning of a new tightening cycle similar to 2022-2023. Instead, it may signify the start of "preventive rate hikes," aimed at reversing last year's three rate cuts to bring inflation back to target levels.

He stated that further rate hikes will not resolve external shocks such as war and energy price inflation, but will alleviate financial market concerns about the Federal Reserve's credibility in fighting inflation. The Federal Reserve cannot continually turn a blind eye to shocks that recur or fail to dissipate as expected. However, by slowing activity in other sectors of the economy to curb inflationary pressures, further rate hikes could also risk pushing the economy into stagflation.