Schlegel and Williams harden the case for more Fed rate hikes
Money markets are pricing three more Fed rate hikes over the next year.
Published
Swiss National Bank's Schlegel said inflation pressure is now slightly higher than it was in June. Fed Chair Williams said the central bank cannot ignore supply shocks that have kept price pressure persistent.
The remarks add to a run of hawkish signals from central bankers. Powell said after September's rate hike, the Fed's first since 2023, that another increase may be needed to curb inflation. Williams has also said before that expectations of higher real rates are a big part of what has pushed bond yields up.
Bond and commodity markets have already moved to reflect that view. In Thursday's session the 10-year Treasury yield climbed to 5.17% and the 30-year yield reached its highest level since 2004. Brent crude settled above $106 a barrel.
Neither Schlegel nor Williams shifted the market's directional view on rates. But by putting supply-side persistence explicitly in focus, they hardened the rationale behind the current pricing of further hikes, leaving the hawkish backdrop for bonds and oil intact.