Expectations have jumped for the central bank to make its first 100-basis-point rate hike in decades, and Fed Fund futures contracts fluctuated wildly yesterday.
Early this week (after the 9.1% June CPI number was release), the Wall Street predicted a 83% of a 1% point hike. However, after the comments from Fed Governor Christopher Waller, the possibility dropped to 43% (which is still pretty high).
We don’t want to make snap policy decision based on some knee-jerk reaction to what happened in the CPI report.
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The next Fed meeting will happen on July 26-27, and according to economist Mohamed El-Erian, the Fed now has no choice but to get aggressive with rate hikes.
Have no doubt: the latest inflation numbers are indicative of rough seas ahead, particularly for the most vulnerable segments of society in the US and around the globe.
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And stock market… Oh boy, there will be much more pain coming, as Bank of America yesterday slashed its S&P 500 forecast to 3600, the lowers on Wall Street.