On Thursday, August 18, senior Fed officials continued to pour cold water on market expectations.

Fed Eagle St. Louis Fed Chairman James Bullard said he preferred the Fed to raise interest rates by 75 basis points in September.

Brad said he was considering supporting another big rate hike at next month's Fed meeting, adding that he was not ready for the economy to experience the worst of soaring inflation:

We should continue to quickly raise policy rates to levels that will put significant downward pressure on inflation. I really don't understand why we have to put off raising interest rates until next year.

Referring to next month's interest meeting, he said:

I am now inclined to raise interest rates by another 75 basis points. I think we have a relatively good interpretation of the economy, and our inflation rate is very high, so I think it makes sense to continue to raise policy interest rates and move into a range where inflation can be controlled.

Brad is not the only senior Fed official to release the eagle recently.

On the same day, George, chairman of the Kansas Fed, another hawkish Fed official, expressed a similar view. She believes that while US inflation may be moderating, it is still on the high side:

Us CPI figures for July are encouraging, but it is too hasty to declare the Biden administration's victory against inflation.

Nonetheless, Mary Daly, a dovish Fed official and chairman of the San Francisco Fed, believes the Fed should raise interest rates "slightly" above 3 per cent by the end of the year to cool inflation:

We need to raise interest rates to at least a neutral level, about 3%, but may enter a restricted area.

Daley further said that the exact amount of interest rate hike in September, depending on the next economic data, 50 basis points or 75 basis points, may be the appropriate rate increase.

Although Daley has been relatively moderate, because she has always been relatively dovish, she said she could raise interest rates by 75 basis points, breaking market expectations that the Fed would suspend or sharply narrow the rate hike.

She further said:

We don't want the market to think that the Fed's path is humped, that is, to raise interest rates quickly this year and cut them aggressively next year.

According to the median estimate of the fed's forecast in June, policymakers expect the federal funds rate to reach 3.4% this year.

According to the forecast of the Chi Stock Exchange, the probability that the Fed will raise interest rates by 50 basis points in September is about 60%, and the probability of raising interest rates by 75 basis points is about 40%.

Brad continues his hawkish view

Earlier this month, Brad again endorsed the Fed's aggressive move to raise interest rates.

Brad said at the time that he was in favor of raising interest rates "ahead of schedule" and that he wanted interest rates to be between 3.75% and 4% by the end of the year.

On August 3, Brad said:

We have to see convincing evidence that headline and other core inflation indicators have fallen across the board in order to think that the action we have taken is sufficient.

We still have some ways to tighten monetary policy further, and we should let the policy interest rate reach 3.75% to 4% this year. We will track the data very carefully.

According to Brad, the Fed will raise interest rates by another 150 basis points this year.

Referring to the current aggressive rate hike by the Federal Reserve, he said:

I like to raise interest rates "in advance". I think this has enhanced our credibility in the fight against inflation and brought inflation expectations under control.

On August 2, Mr Brad said that modern central banks had more credibility than they did in the 1970s, and that the Fed and the ECB could reduce inflation while avoiding a recession and achieve a "relatively soft landing".

Brad said:

Because modern central banks are more credible than they were in the 1970s, the Fed and the ECB can methodically reduce inflation and achieve a relatively soft landing.

Brad believes that the modern Fed will not drag the economy into recession as Volcker did in the early 1980s. By the early 1980s, the United States had experienced a decade of high inflation. When Paul Volcker became chairman of the Federal Reserve, he raised interest rates to the level of punishment to restore credibility and fought off inflation at the cost of a recession in the United States.

The minutes of the July Fed meeting poured cold water on the market.

In addition, the minutes of the July meeting released by the Federal Reserve on Wednesday, August 17, also poured cold water on the market.

However, in the minutes of the meeting, some analysts believe that although the Fed has dove statements, it has actually released a lot of hawkish clues.

First of all, the Federal Reserve acknowledges that the current growth momentum of the US economy is quite weak and that the US economy will return to growth in the second half of this year, but the growth rate is still below trend. Fed officials also pointed out that the current overall labor market data may not represent the true state of the economy. But for now, the Fed doesn't care about the data.

The minutes suggest that below-trend growth is a feature of current policy settings, not a policy error, as the Fed needs to align demand with supply to curb inflation. While the uncertainty of the data does make excessive tightening a risk, the possibility of high inflation becoming entrenched will be an even more dangerous "major risk" if the market cannot accept the Fed's determination to tighten appropriately.

The minutes also revealed that Fed officials will live up to their promises of austerity.