An increasing number of Federal Reserve officials are pushing back against the latest market rally, warning that the central bank will have to continue raising rates until inflation meaningfully declines.


The central bank is not close to a monetary pivot.

Al Drago/The New York Times via AP, Pool

July was the best month for markets since 2020 due to optimism that inflation may have peaked and the Federal Reserve could soon pull back on its aggressive tightening of monetary policy.

According to a growing number of Fed officials who have spoken out in recent days, the market is getting ahead of itself by anticipating a monetary pivot, which they argue won't happen anytime soon.

In an interview on Tuesday, the president of the San Francisco Fed said that the Fed is not close to being done in its fight against inflation.

The central bank needs to keep raising rates until it sees conclusive evidence that inflation has peaked, according to the Cleveland Fed President.

Speaking to reporters on Tuesday, Chicago Fed President Charles Evans also agreed that the Fed will keep raising rates for the foreseeable future, expecting a "reasonable" 50-basis point increase at the next meeting in September.

The recent remarks from central bank officials follow similar commentary from Minneapolis Fed President, who told CBS on Sunday that the Fed is committed to bringing inflation down even if we are technically in a recession.

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Bill Dudley, a former New York Fed President, warned in an op-ed that monetary tightening will go on for a long time. He said investor speculation about a Fed pivot was counter-productive.

Key Background:

Since the beginning of the year, the Federal Reserve has raised interest rates four times. The central bank hiked rates by 75 basis points last week, after increasing them by 75 basis points in June. The central bank remains attentive to inflation risks despite the fact that business activity has softened. With consumer prices remaining at 41-year highs, traders are pricing in another rate hike of at least 50 basis points.

What To Watch For:

"This round of Fed speak suggests markets might be a little too optimistic pricing in a Fed pivot and that rate cut calls for next year are too optimistic."

The U.S. and Chinese stock markets are under pressure.

Oil prices plunge 5% after the best month of the year for stocks.

Despite the U.S. GDP Shrinking for a second quarter in a row, experts say there is no recession yet.

The stock market jumped 400 points after the Fed hiked rates.