China International Capital Co said the Fed should raise rates in September to
preserve its credibility, calling that the decisive factor for policy. The firm
said July FOMC member Waller’s deliberate ambiguity confused markets and helped
push the US Treasury term premium from 0.65% at end-July to 0.9% by mid-August,
forcing hawkish language at Jackson Hole. While softer data would have given the
Fed room to wait, successive stronger-than-expected nonfarm payrolls and
inflation have increasingly cornered policymakers. The report warned that if the
Fed again refrains from hiking, markets may view prior hawkish signals as
hollow, risking a deeper credibility crisis and loss of control in the Treasury
market.
