The day before, I covered comments from San Francisco Fed President Mary Daly,

The day before, I covered comments from San Francisco Fed President Mary Daly, Dallas Fed President Lori Logan, and finally Minneapolis Fed President Kashikari. Lori Logan, who is classified as hawkish, started to lower his view of further rate hikes with a little wariness… Mr. Kashikari agrees with that argument, but he also points out that a certain premise is needed. And a similar stance appeared in the comments of hawkish director Christopher Waller last night. Mr. Waller also says that if financial markets are tightening on their own, the Fed's tightening may not proceed further.

After all, that's the whole point of the logic. When market interest rates rise, even if they don't have to raise the benchmark interest rate, they will tighten the financial markets on their own. They argue that then the real economy will slow down and start to feel the weight of austerity. The doves are still cheering up that the rate hike is over. On the other hand, the hawks are talking about conditional rate hikes by slightly breaking the existing stance. If market rates soar as they do now... You don't have to raise interest rates... It's changed to a stance.

The biggest question about the U.S. government bond market right now is who will buy U.S. government bonds? It seems that it is not easy for foreign central banks to buy U.S. government bonds. China and Russia turned around, and Japan also had to reduce its holdings of government bonds to protect its yen exchange rate. It is not easy for various countries to increase U.S. government bonds aggressively. Quantitative easing is also not easy. It seems that it will be difficult to see the word quantitative easing for a long time… This is the central bank buying long-term government bonds. Now there's a quantitative tightening going on. So it would be nice if the banks in the U.S. bought it. And the recent surge in government bond interest rates is also causing the banks in the U.S. to lose a lot of money on long-term bonds that they used to have. I don't think it's going to be easy to buy more government bonds in the future.

In this situation, the market is paying attention to the financial problems of the United States. The financial problems... Actually, it's not a matter of a day or two, but... The more attention is paid to it, the more intense the market reaction is whenever fiscal issues arise. In this situation, if there is an additional increase in the base rate... Perhaps even though long-term interest rates are still tight, long-term rates rise sharply, leading to an early overkill, because the Fed can adjust short-term rates but does not control long-term rates.

Here, the Fed is going to focus on the financial system crisis caused by long-term interest rate surges, just like they did in September-October last year when they did quantitative easing during rate hikes in the U.K.. then we have to prevent a sharp rise in long-term interest rates. Then, more than anything else, factors that can be artificially controlled... Yes... Controlling market fears of a rate hike would be the easiest way.

The problem is the market's reaction when there's an expectation that it will stop raising interest rates. It's very frightening and then it reacts right away. I knew it… And the response is, yes, this is when long-term government bond purchases start pouring in, and the stock market starts to pick up. And asset prices are showing a rapid recovery, and consumption continues again, which makes it difficult to control inflation. Inflation that's not as easy as you think. So how do we respond… Go, go, go, go, go, go, go... Is it an impression? ^^;;

The question is, is the current rise in interest rates simply due to the U.S. fiscal deficit issue? No, it's not… If, as Governor Lori Logan said, the Fed's rhetoric of Higher for Longer worked properly, and the long-term premium of long-term interest rates rose on concerns that interest rates would not come down easily in the long run... It could be a little bit of a twist, if the Fed changes its words a little bit here and the Higher for Longer, which the market has been worried about, eases... And the premium for the period that went up with that belief comes down. And then the whole market rate comes under downward pressure again. This will provide a new opportunity for Buy the Dip. So overtime with inflation??

Back and forth... I understand why we have to do it and the situation. It's not an easy situation. When I looked at the Fed's policies in the past, I was like, why is this stupid... I often thought that I was acting like a fool in the shower room, but looking at the recent situation... You have no choice but to make that choice. Yes. If you go back and forth, inflation may not go down as easily as you think. In the future, the market will be thinking about the possibility of further increases in December, not November, and the end of Higher for Longer. I'm going to shorten today's essay here. Thank you.