According to recent reports close to central bank officials, the U.S. Federal Reserve will likely deliver another interest rate hike by roughly 75 basis points (bps) next month. Moreover, markets are predicting another rise by three-quarters of a point, and CME’s Fedwatch Tool indicates there’s a near-certain (98%) chance the central bank will choose a 75bps raise. Despite the market expecting an aggressive Fed, an analyst from investors.com believes the Fed will pivot by December depending “on how financial markets act between now and then.”
Philadelphia Fed President: ‘Inflation Is Known to Shoot up Like a Rocket and Then Come Down Like a Feather’
It seems pretty certain that the U.S. Federal Reserve will raise the federal funds rate (FFR) by roughly 75bps, according to various reports and CME’s Fedwatch Tool. That’s despite the fact that politicians and a recent United Nations Conference on Trade and Development (UNCTAD) report have urged the Fed to slow down. Analysts from the investment bank Barclays explained this week that the central bank may have to slow down or stop monetary tightening by eliminating balance sheet reductions.
CME’s Fedwatch Tool indicates the chance of a 75bps jump is around 98% today and a report from the New York Times (NYT) published on October 18, says “Federal Reserve officials have coalesced around a plan to raise interest rates by three-quarters of a point next month.” The NYT report further explains that the “conversation about whether to scale back is now more likely to happen in December.” Other reports indicate that futures markets investors have fully priced in a number of FFR increases that will reach 5% by May 2023.
The president of the Philadelphia Fed, Patrick Harker, explained on Thursday that he envisions the FFR well above 4% by 2022’s end. “After that, if we have to, we can tighten further, based on the data,” FT reports. “But we should let the system work itself out. And we also need to recognise that this will take time: Inflation is known to shoot up like a rocket and then come down like a feather,” Harker added. FT’s report further quotes Neel Kashkari, president of the Minneapolis Fed, speaking at a panel about the rate rising past 5%.
Kashkari said:
If we don’t see progress in underlying inflation or core inflation, I don’t see why I would advocate stopping at 4.5%, or 4.75% or something like that. We need to see actual progress in core inflation and…
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