Société Générale: The Federal Reserve is unlikely to repeat the interest rate hike cycle from 2022 to 2023

Chi Lo, a strategist at Societe Generale, stated that although the market expects two more rate hikes, it is unlikely that the Federal Reserve's rate hike in September will mark the beginning of a new tightening cycle similar to that of 2022 to 2023. Instead, this may signal the start of preventive rate hikes aimed at bringing inflation back to target levels by reversing last year's three rate cuts.

He noted that further rate hikes will not alleviate external shocks such as war and energy price inflation, but they will ease financial market concerns about the Federal Reserve's anti-inflation credibility. The Federal Reserve cannot continue to ignore recurring shocks or those that fail to dissipate as expected. By slowing down activity in other areas of the economy to curb inflationary pressures, further rate hikes may also carry the risk of pushing the economy into stagflation.