100-basis-point rate hike

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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.

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.

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.