After the disappointing August consumer price index (CPI) reports, the financial markets tanked as everyone started freaking out about a potential full-point increase in interest rates at this month’s Federal Open Market Committee (FOMC) policy meeting.
While it is likely the central bank will continue to hike rates and maintain its tightening campaign, the market is not expecting a 100-basis-point jump at the September FOMC powwow.
According to the CME FedWatch Tool, most of the market is penciling in a three-quarter-point boost.
Here is a chart:
Of course, what the Eccles Building needs to do is pull a Paul Volcker and go scorched-earth on monetary policy.
This would include bringing the benchmark fed funds rate to double-digit territory.
Nobody has the intestinal fortitude to rip off the band-aid like this and crash the Fed-dependent financial markets and economy.
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