Posted on 06/12/2022 8:29:42 PM PDT by MinorityRepublican
Stubbornly hot U.S. inflation is fueling bets that the Federal Reserve will get more aggressive about trying to cool price pressures and even potentially ditch its own forward guidance by delivering a jumbo-sized interest rate hike in coming months.
Fed policymakers had already all but promised half-point interest rate hikes at their meeting next week and again in late July, following May's half-point hike and the start of balance sheet reductions this month. That would be more policy tightening in the space of three months than the Fed did in all of 2018.
On Friday, traders of futures tied to the Fed policy rate began pricing in an even bolder path after U.S. Labor Department data showed sharply higher food and record gas prices pushed the consumer price index up 8.6% last month from a year earlier. A separate University of Michigan survey showed longer-term inflation expectations rising to their highest since 2008.
Prices of Fed funds futures contracts now reflect better-than-even odds of a 75-basis-point rate hike by July, with a one-in-four chance of that occurring next week -- up from one-in-20 before the inflation report -- and a policy rate in at least the 3.25%-3.5% range at year end.
Yields on the two-year Treasury note, seen as a proxy for the Fed's policy rate, topped 3% for the first time since 2008.
"We believe that today's inflation data - both the CPI and UMich inflation expectations - are game changers that will force the Fed to switch to a higher gear and front-load policy tightening," wrote Jefferies' Aneta Markowska, who joined economists at Barclays on Friday in forecasting a 75-basis-point rate hike at the Fed's June 14-15 meeting.
Economists still expect a half-point hike next week, and more of the same at subsequent meetings through at least September.
(Excerpt) Read more at news.yahoo.com ...
3/4% rate hike is not much.
I see analysts on tv who say they should just raise rates 4% in one shot. It’s obvious they have to raise a lot more to impact inflation at these levels.
Sounds like a neutral rate would be about 8%.
Inflation rewards debtors and punishes savers.
Tax code, “student aid”, and welfare rules “reward” those who rack up debt, especially “home equity”.
Rates need to go up very high to choke inflation, but why? Inflation is making that 30 trillion you owe more like 25 trillion...it’s a good thing. Right?
Overseas markets already down 3% or so.
half-point interest rate hikes
Paul Volcker and Alan Greenspan would be much more aggressive. The Federal Reserve got caught napping. So they are paying for it. Not completely their fault. The President and Congress overheated the economy with covid stimulus funds.
Walmart raised the price of many plants from $10.88 to $13.88 in about a day.
The Federal Reserve is doing its best to prevent bank depositors from bring fairly compensated for inflation.
If I had say $10000 on deposit, I see no reason why $800 in Federal Reserve notes can’t be added by the Federal Reserve to that $10000 to compensate me for federally induced 8% inflation.
bring->being
“napping”
Stalling for as long as and as far as possible is what they are trying to do.
If you are a low income retiree you are not paying on the $30 trillion but the buying power of your savings is vanishing fast.
There are tens of millions of low income retirees, and they vote regularly.
Joe should be dirtying his diapers.
Gonna need double digits to get a lid on it.
This will kill everything.
Inflation will continue and likely pickup speed to the crash.
Most likely. I think it'll take either Trump or DeSantis to crush inflation. But we have another 2 and half years of this at least.
That ship has been in the rear view mirror for some time now.
Time to call Carter.
Maybe 22.5% is the cure like back in 1979.
Time to call Carter.
Maybe 22.5% is the cure like back in 1979.
At 7% inflation, the debt is halved in 10 years
It is also making retirees on fixed incomes take massive virtual pay cuts.
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