CICC Says September Rate Hike Would Best Preserve Fed Credibility

CICC said the key factor in deciding whether to raise rates is preserving Federal Reserve credibility, and that September would be the best time to do so. According to Odaily, the report said Christopher Waller’s deliberate ambiguity at the July FOMC confused market expectations, pushed U.S. Treasury term premium from 0.65% at the end of July to 0.9% in mid-August, and forced him to make hawkish commitments at the Jackson Hole meeting. The report added that if data weakens, the Fed would still have room to maneuver, but stronger-than-expected nonfarm payrolls and inflation have gradually cornered the central bank. It said short-term indicators have limitations, but the Fed can rely only on those data points before the FOMC meeting. The report warned that if the Fed again chooses not to raise rates, it could deepen the credibility crisis and unsettle the U.S. Treasury market.