Fed is likely to front-load rate hikes, with 75 bps in September – Moody’s

Moody’s Investors Service is out with their expectations on the upcoming US Federal Reserve (Fed) interest rate decision, in the wake of a 75 bps rate hike fully priced in for September.

Key quotes

“The August US consumer price index changes the calculus for the Federal Reserve, which is now likely to hike the target range for the fed funds rate by 75 basis points.”

“Financial markets are fully pricing in a 75-basis point rate hike this month and put the odds of a 100-basis point hike at 25%.”

“It’s fairly clear that the Fed is going to front-load rate hikes more than in our September baseline and the terminal rate, or the peak for the fed funds rate this cycle, will also be higher.”

“The upcoming baseline forecast is going to factor in a 50-basis point rate hike in November (previously 25 basis points) and maintain a 25-basis point hike in December. This would imply that the target range for the fed funds rate will likely be near 4% to 4.25%.”

“The Fed’s track record in tightening monetary policy without causing a recession is not great.”

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