Inflation Surprises to the Upside, Rattling Financial Markets; Analysts Warn Fed Could Hike by 50 Basis Points in December
October 15 — A surprise rebound in U.S. CPI inflation has put the Federal Reserve in a policy bind. Markets at one point priced in a 55% chance of a Fed rate hike in October, but most observers still believe the Fed is likely to leave rates unchanged this month.
Jason Schenker, president of Prestige Economics, warned that if upcoming jobs and CPI data both show that September’s rate hike did little to curb inflation, the Fed could raise rates by 50 basis points in December, rather than the 25 basis points markets expect.
Analysts say the size of this year’s rate hikes will directly shape monetary policy early next year—determining whether the Fed pauses its tightening campaign or continues its rate-hiking cycle.
Market reaction suggests concerns are mounting that higher interest rates will weigh on risk assets: after the inflation data was released, the S&P 500 fell 1.1%.
In short, the rebound in inflation is reshaping market expectations for Fed rates. If a 50-basis-point hike materializes in December, the cost of dollar funding will rise significantly, putting greater downward pressure on risk assets such as U.S. stocks and cryptocurrencies.
Looking ahead, the combined signals from jobs and inflation data may be the key measure of just how aggressively the Fed will act. Each major data release prompts markets to recalibrate the rate path, with risk-asset valuations adjusting accordingly.
#美联储12月或加息50个基点
October 15 — A surprise rebound in U.S. CPI inflation has put the Federal Reserve in a policy bind. Markets at one point priced in a 55% chance of a Fed rate hike in October, but most observers still believe the Fed is likely to leave rates unchanged this month.
Jason Schenker, president of Prestige Economics, warned that if upcoming jobs and CPI data both show that September’s rate hike did little to curb inflation, the Fed could raise rates by 50 basis points in December, rather than the 25 basis points markets expect.
Analysts say the size of this year’s rate hikes will directly shape monetary policy early next year—determining whether the Fed pauses its tightening campaign or continues its rate-hiking cycle.
Market reaction suggests concerns are mounting that higher interest rates will weigh on risk assets: after the inflation data was released, the S&P 500 fell 1.1%.
In short, the rebound in inflation is reshaping market expectations for Fed rates. If a 50-basis-point hike materializes in December, the cost of dollar funding will rise significantly, putting greater downward pressure on risk assets such as U.S. stocks and cryptocurrencies.
Looking ahead, the combined signals from jobs and inflation data may be the key measure of just how aggressively the Fed will act. Each major data release prompts markets to recalibrate the rate path, with risk-asset valuations adjusting accordingly.
#美联储12月或加息50个基点