BNP Paribas: The Federal Reserve is unlikely to repeat its 2022-2023 interest rate hike cycle.

BNP Paribas strategist Chi Lo stated that despite market expectations of two additional interest rate hikes, a September rate increase by the Federal Reserve is unlikely to trigger a new tightening cycle similar to the 2022-2023 period. Instead, this move may signal the start of "preemptive rate hikes" designed to reverse last year’s three rate cuts and bring inflation back to the target level. He added that further hikes will not resolve external shocks such as the ongoing war and energy price inflation, but will ease financial market concerns over the Fed’s credibility in curbing inflation. The Federal Reserve cannot turn a blind eye to recurring shocks or those that fail to subside as anticipated. However, by suppressing inflationary pressures through slowing activity in other sectors of the economy, additional rate hikes could also risk pushing the economy into stagflation.