The consensus is that they will raise rates by a half-percentage point next week, on Wednesday.
A pair of economists from large Wall Street firms have called for a massive rate hike at the Federal Reserve’s policy meeting next week, citing an unexpectedly high inflation number.
Because of Friday’s consumer price index news, Barclays economist Jonathan Millar believes the Fed now has good grounds to surprise markets by increasing more forcefully than expected in June.
In May, inflation rose even more, with prices climbing 8.6% year over year, the biggest increase since December 1981. Dow Jones polled economists, who predicted an increase of 8.3 percent.
The Fed has raised rates by 75 basis points in total, including a 50 basis point move in May. The consensus is that they will raise rates by a half-percentage point next week, on Wednesday.
Aneta Markowska, an analyst at Jefferies, now expects the Fed to raise rates by 0.75 percent.
“We believe today’s inflation statistics – both the CPI and UMich inflation expectations – are game changers, forcing the Fed to shift gears and front-load policy tightening,” Markowska wrote in a note.
Following the scorching inflation report, Fed officials recently explored the prospect of executing two more 50 basis point rate hikes over the summer before taking a step back in September, but traders are now pricing in more hikes.
