Aurelia Butler

NEW YORK (Reuters) – The U.S. Federal Reserve could raise interest rates to 6% and keep them there for an extended period of time to fight inflation, said Rick Rieder, chief investment officer of global fixed income at BlackRock (NYSE:BLK), the world’s largest asset manager.Federal Reserve Chair Jerome Powell told U.S. lawmakers on Tuesday that the U.S. central bank could become more aggressive in its rate hike path following recent strong economic data. “We think there’s a reasonable chance that the Fed will have to bring the Fed Funds rate to 6%, and then keep it there for an extended period to slow the economy and get inflation down to near 2%,” Rieder said in a note on Tuesday.The Fed’s policy rate is currently in the 4.50%-4.75% range.As of December, officials saw that rate rising to a peak of around 5.1%, a level investors expect may move at least half a percentage point higher now.Goldman Sachs (NYSE:GS) said in a note on Tuesday that it had raised its forecast for the so-called terminal rate by 25 basis points to a range of 5.5%-5.75%.Bets on the Federal Reserve more aggressively hiking rates have gained more traction in money markets in recent weeks, after a string of economic data showing a tight job market and inflation remaining high. That data revived fears the Fed may resort once again to the same super-sized interest rate hikes that hammered stocks and bonds last year.Traders had largely expected the central bank to raise rates by 25 basis points at its next rate-setting meeting on March 21 to 22, but after Powell’s remarks on Tuesday Fed funds futures were pricing in a 50 basis points hike, CME Group (NASDAQ:CME) data showed. More

NEW YORK (Reuters) – Billionaire investor Ken Griffin, the founder of Citadel and Citadel Securities, said on Tuesday the Federal Reserve needs more consistency of communication in order to tame inflation and that the setup for a recession is unfolding.”If I could tell one thing to the (Fed) chairman, I would tell him to say less. I would just write a message: we’re going to put the inflation genie back in the bottle,” Griffin said in a televised interview with Bloomberg.Earlier on Tuesday, Fed chair Jerome Powell said the Fed will likely need to raise interest rates more than expected to control inflation. Previously, some market participants have at some points read Fed official’s speeches as less hawkish.”I really believe consistency of messaging is so important because part of how the Fed gets the job done is the perception of the American public that they can get the job done,” Griffin said. He believes the Fed will increase interest rates to around 5.5% to tame inflation.Still, the billionaire said the setup for a recession is unfolding, as late this year or next year the “pandemic orgy” of spending will come to an end.Griffin expressed some concerns about the impact of a long debate about the debt ceiling until a final deal is made, but said common ground will be reached. “I do think it’ll be market volatility that will drive that compromise.”He said Citadel is currently negotiating an enterprise-wide license to use artificial intellengence tool ChatGPT to help its developers write better code, translate software between languages and analyze information. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.To slightly mangle Bruce Springsteen’s “Born To Run”: the market’s jammed with broken heroes on a last chance Powell drive; everybody’s out on the run tonight, and there’s no place left to hide. There certainly appears to be no place left to hide from higher U.S. interest rates, bond yields and a stronger dollar following Fed Chair Jerome Powell’s testimony to the Senate Banking Committee on Tuesday.Investors had generally expected Powell to strike a hawkish tone, so the scale of price adjustment across financial markets after he opened the door to higher and possibly faster rate increases was even more staggering.Asian markets will feel the aftershocks when they open on Wednesday, with Japanese current account data the only major economic data point on the calendar that could potentially influence the yen. The tone, however, will be set by Tuesday’s seismic market moves, some of which bear repeating: the dollar jumped 1.2%, its best day since November; the two-year Treasury yield hit 5% for the first time since 2007; the 2s/10s yield curve inversion reached 100 basis points for the first time since 1981.Graphic: US 2-year yield https://fingfx.thomsonreuters.com/gfx/mkt/zjvqjygygpx/US2Y.pngGraphic: US 2s/10s yield curve https://fingfx.thomsonreuters.com/gfx/mkt/dwpkdznzyvm/USCURVE.jpg The implied peak Fed rate is now 5.65%, traders now reckon a 50 bps rate hike from the Fed later this month is twice as likely as a quarter-point increase. Given all that, it is maybe surprising that Wall Street’s three main indexes ‘only’ fell between 1% and 1.5%.Powell’s hawkishness contrasted with Bank of England policymaker Catherine Mann, who said sterling could be vulnerable to more aggressive policy moves from other central banks, especially the Reserve Bank of Australia (RBA).The RBA raised rates by 25 bps as expected on Tuesday to 3.60%, the highest in more than a decade. But its dovish outlook caught markets flat-footed, and the Australian dollar plunged 2%. Unsurprisingly, sterling and the Aussie dollar were easily the worst-performing major currencies on the day, but the greenback is sure to flex its muscles against Asian currencies on Wednesday.As all-consuming as Powell’s remarks were, investors in Asia will also be keeping a close eye on news from China and signs that relations with the U.S. are deteriorating further. Trade activity fell in February, reflecting weak global and domestic demand, but trade with Russia boomed. Asked if China and Russia would abandon the U.S. dollar and euro for bilateral trade, Foreign Minister Qin Gang said countries should use whatever currency was efficient, safe and credible. Qin said currencies should not be the “trump card” for unilateral sanctions, or disguise for “bullying or coercion,” and warned Washington to stop suppression or risk ‘conflict’. Here are three key developments that could provide more direction to markets on Wednesday:- Fed Chair Jerome Powell testimony to House Financial Services Committee- Fed’s Barkin speaks- Japan current account (January) (By Jamie McGeever; Editing by Josie Kao) More