It can’t be stressed enough just how unusual it would be for the Fed to raise rates that sharply. That would leave the Fed’s key short term rate at 1.5%, a dramatic rise from the beginning of the year, when rates were still near zero. Investors also are pricing in a more than 70% possibility that the Fed will lift rates by three-quarters of a percentage point in June. Inflation is so hot the Fed may have to hike interest rates like it's 1994 According to a report by the Commerce Department, sales of new single-family homes slowed in February as mortgage rates inch up and and house prices continue to rise. New homes under construction are seen at a housing development on Main Novato, California. Traders are now pricing in a nearly 100% likelihood of a half-point hike at the Fed’s May meeting, according to the widely watched federal funds futures trading on the CME, and a more than 25% chance of another 50 basis point increase in June. “But they have to get ahead of this, and unfortunately the recipe for that is to move more aggressively with rate hikes.”
There is only so much they can do now, it’s almost already too late,” said Johan Grahn, vice president and head of ETFs at AllianzIM. “The Fed should have taken the opportunity to raise rates earlier. But it’s clear that rates are likely to start climbing a lot higher soon. (Inflation hawks typically push for higher rates while so-called doves favor lower rates to stimulate growth.) Bullard suggested the Fed could raise rates by as much as 75 basis points.įed chair Jerome Powell has started to sound a lot more hawkish in recent weeks, but he may not want to move as aggressively as Bullard would like.
Louis Federal Reserve president James Bullard, one of the more hawkish members among the Fed’s regional bank chiefs, reiterated at an event Monday that the Fed needs to “expeditiously” raise rates in order to tamp down inflation.
Now there are growing expectations that the central bank is about to dramatically step up the size and pace of its rate hikes in order to put a brake on surging consumer prices. Last month, the Federal Reserve raised interest rates for the first time since December 2018.
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