Monetary policy

Sarah Bloom Raskin tried again Wednesday to assuage Republicans’ concerns about her hawkish stances on mitigating climate risks ahead of a vote on her nomination to be Wall Street’s top bank regulator.

The Federal Reserve Bank of Boston announced Susan Collins, provost and executive vice president for academic affairs at the University of Michigan, will become its next president effective July 1.

The market consensus is that interest rates will rise by two to three percentage points over the next three years. What will that mean?

Former U.S. Treasury Secretary Lawrence Summers said investors need to brace for the Federal Reserve to potentially raise interest rates at all seven remaining policy meetings this year and even for it to hike by more than a quarter point in one go.

Federal Reserve Bank of St. Louis President James Bullard said he would like to raise interest rates at the central bank’s meetings in March and May but played down the benefits of a larger-than-expected move.

Federal Reserve Bank of San Francisco President Mary Daly said the central bank could raise interest rates as early as March to fight high inflation, but she cautioned against overreacting and tightening policy too fast.

Bostic stuck to his prediction that three quarter-point increases starting in March is the most likely scenario, though stubbornly high consumer prices may justify a more robust rate rise.

The two biggest U.S. banks raised their forecasts of how quickly the Federal Reserve will raise interest rates this year, with Bank of America Corp. predicting a move at every meeting to tackle the highest inflation in four decades.

The statement offered no surprises, but Fed Chair jerome Powell's refusal to denounce more hawkish scenarios hurt market sentiment.

Why are markets so sanguine about the interest rate outlook? The answer lies in the Fed’s balance sheet, and in particular the level of excess reserves placed there by commercial banks.