Briefly –
- The financial press sees a 75 basis point rate surge.
- Goldman Sachs anticipates a 75bp hike in June & July.
- S Dollar to remain strong.
The market landscape leans towards an astonishment from the U.S Fed as we approach the crucial Federal Reserve financial meeting tomorrow. Meanwhile, the Fed had confirmed a 50bp rate increase at its two summer meetings.
However, that could be history. News from the monetary press believes Fed will likely resort to a 75 basis point rate tomorrow. That’s due to the upside amazement in CPI’s May report. Meanwhile, most investment houses altered their predictions for upcoming rate hikes, inkling two 75 basis points during summer. For now, the Fed’s rate cycle will likely differ from previous decisions, therefore backing a steady dollar.
Upside Surprise in May CPI Report
Last Friday’s CPI data revealed escalating inflation in the world’s leading economy. Meanwhile, the United States Federal Reserve remains worried about increasing prices of services and goods. And the recent inflation data could be enough for Fed to resort to a surprising monetary move.
Current guidance implies a 50 basis points rate hike only. But the U.S Fed knows something more is crucial to halt the surging inflation. Besides the surprise report in the CPI report, the United States economy sees increasing recession fears. Michigan consumer survey shows long-term inflation anticipations rose further, therefore pressuring the U.S Fed to act more.
Financial Press Suggests 75bp Rate Increase
How does Fed hint at rate hikes exceeding market expectations? It presents financial press representatives with potential financial moves. Wall Street Journal reveals clues from the Fed officials about an upcoming 75bp rate increase. Nick Timiraos has had time to interview Gary Gensler (Fed Chair) in the past. Thus, a Wall Street Journal article could be a legit tool to highlight markets about expectations shift.
Goldman Sachs changed its interest rates expectation following this article, revising its Fed predictions to include 75 basis point rate increases in June & July.
What are your views about Fed’s financial policy path amidst ongoing market conditions? Feel free to leave a reply in the comment section below.