Another rate hike of .75 is likely when the Fed meets later this month. The economy is showing signs of a cooling off, but with inflation still running at a 40 year high, it’s likely not enough to convince the Fed that a third rate hike of .75 isn’t needed.
Traders are now putting the probability of a .75 rate hike at 82%, a jump from 69% from a week ago. This came after the Wall Street Journal published an article that pulled together recent Fed officials’ comments supporting continued aggressive rate increases to bring down inflation and cool the economy.
On Aug. 26, Fed Chair Jerome Powell said that “another unusually large increase could be appropriate at our next meeting,” if the economy isn’t showing enough signs of cooling off.
New York Fed President John Williams said last week that the Fed will “need to have restrictive policy for some time,” likely through 2023.
Cleveland Fed President Loretta Mester expects the federal funds rate target range to stay over 4% for all of next year.
In early August St. Louis Fed President James Bullard said the central bank has “some ways to go” in raising rates and estimated the policy rate would be 3.75%-4.0% by the end of the year. The current rate is 2.25%-2.50%
A few important dates in September to be paying attention to.
September 13th-Aug CPI (Consumer Price Index) data will be released.
September 14th-Aug PPI (Producer Price Index) data will be released.
September 20th-Next Fed meeting and when the next likely rate hike will be announced.
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