"Market News | One-Off Calibration or the Start of a Cycle: What Actually Divides Wall Street
The Federal Reserve announces its rate decision and economic projections at 2:00 p.m. ET, with Chair Kevin Warsh's press conference half an hour later.
Rate futures indicate roughly 90% probability of a 25 basis point increase, which would lift the target range to 3.75%-4.00%. A Reuters survey of 101 economists found 86 expecting that move.
The disagreement is entirely about what it means.
Bank of America Is the Most Hawkish at 75 Basis Points
Three houses expect two hikes this year. JPMorgan, Morgan Stanley, HSBC and Barclays all forecast 25 basis points in September and December.
Morgan Stanley cites a slower pace of inflation" means that Wall Street largely expects the Federal Reserve to raise interest rates by 0.25 percentage points. The key debate is not the expected hike itself, but whether it is a one-time adjustment (“calibration”) or the beginning of a broader series of rate increases (“a cycle”).
A calibration would mean the Fed is making a limited tweak to keep policy aligned with current inflation and economic conditions, then may pause and reassess. A rate-hike cycle would mean policymakers see inflation or demand as persistent enough to require several further increases over coming meetings.
“Hawkish” describes a more inflation-focused stance that favors tighter monetary policy and higher rates. In this passage, Bank of America is called the most hawkish because it expects a total of 75 basis points of additional increases—equivalent to three 0.25-point hikes.
Morgan Stanley’s reasoning is that inflation may be falling too slowly, while AI-related investment demand and higher energy prices could keep price pressures elevated. Higher rates can help restrain inflation, but they can also increase borrowing costs and weigh on risk assets such as equities and crypto.
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The Federal Reserve announces its rate decision and economic projections at 2:00 p.m. ET, with Chair Kevin Warsh's press conference half an hour later.
Rate futures indicate roughly 90% probability of a 25 basis point increase, which would lift the target range to 3.75%-4.00%. A Reuters survey of 101 economists found 86 expecting that move.
The disagreement is entirely about what it means.
Bank of America Is the Most Hawkish at 75 Basis Points
Three houses expect two hikes this year. JPMorgan, Morgan Stanley, HSBC and Barclays all forecast 25 basis points in September and December.
Morgan Stanley cites a slower pace of inflation" means that Wall Street largely expects the Federal Reserve to raise interest rates by 0.25 percentage points. The key debate is not the expected hike itself, but whether it is a one-time adjustment (“calibration”) or the beginning of a broader series of rate increases (“a cycle”).
A calibration would mean the Fed is making a limited tweak to keep policy aligned with current inflation and economic conditions, then may pause and reassess. A rate-hike cycle would mean policymakers see inflation or demand as persistent enough to require several further increases over coming meetings.
“Hawkish” describes a more inflation-focused stance that favors tighter monetary policy and higher rates. In this passage, Bank of America is called the most hawkish because it expects a total of 75 basis points of additional increases—equivalent to three 0.25-point hikes.
Morgan Stanley’s reasoning is that inflation may be falling too slowly, while AI-related investment demand and higher energy prices could keep price pressures elevated. Higher rates can help restrain inflation, but they can also increase borrowing costs and weigh on risk assets such as equities and crypto.
$ZEC
$BR
$BTC