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Interest Rates likely to Increase by 75bps this Week

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Interest Rates likely to Increase by 75bps this Week

According to many investors and economists, the Fed’s move of a 75bps push is a real possibility...

Uniic Media
Jun 14, 2022
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Interest Rates likely to Increase by 75bps this Week

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Wall Street closes lower as investors size up earnings, inflation |  Financial Markets News | Al Jazeera
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Yesterday provided what many would consider a “heads up” to investors as markets began to show their preparation for a faster pace of interest rate hikes. Not only is the market functioning off of pure volatility, but the Fed is also contemplating the idea of rushing to a possible 75bps hike for June and July.

The outlook has changed and included the likelihood that inflation hasn’t even peaked yet and is still running ahead of the 2% goal from the Fed. This could likely influence many bigger jumps in rate movement and will be determined during a two-day meeting that ends tomorrow.

According to many investors and economists, the Fed’s move of a 75bps push is a real possibility.

To add to the flame, the Wall Street Journal posted a story yesterday that claims the new path will be back-to-back 75bps rate hikes in June and July, followed by a 50bps move in September, and eases back down in November and December with w 25bps move. By the end of the year, this will leave us with the fed funds rate sitting around 3.25% - 3.50%.

“The most likely triggers for a shift to a more aggressive pace of tightening are the upside surprise in the May CPI report and the further rise last Friday in the Michigan consumer survey’s measures of long-term inflation expectations that have likely been driven in large part by further increases in gas prices.”

Jan Hatzius, Goldman chief economist said.

The unusual nature of the media’s spew so close to the day of the meeting was noted by Krishna Guha, head of global policy.

“Until and unless we see some kind of unofficial clarification, we are forced to take the reports at what we think is face value: it looks like we were wrong and 75 is after all likely this week. We repeat that we think this is not optimal policy and would separately be bad for markets.”

Krishna Guha said.

The CME Group’s Fed Watch tool shows that there is a 96% probability that the 75bps move occurs. Other indicators are prevalent as well such as interest rate markets showing higher and bond yields being pointed out in accordance with the Feds possible aggressive approach. The 10-year Treasury Yields and the 2-year Yield gained 3.37% and 3.34% respectively.

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Interest Rates likely to Increase by 75bps this Week

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