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US: Market braces for another 0.75bp hike from Fed in September

US: Market braces for another 0.75bp hike from Fed in September

Traders are reportedly expecting that the Federal Reserve in the US will increase its interest by three-quarter points during its scheduled meet later this month.

According to the CME Group FedWatch tracker, the probability of the hike increased to 82% on 7th September,.

The news comes after a series of positive economic data and statements by Fed officials, which hinted that the tight policy may likely continue.

Jerome Powell, Chairman of the Federal Reserve, warned that the hikes will continue, and higher rates will likely stay in place.

Even though traders had raised their bets on there being a policy tightening by Fed, stocks still went higher soon after the market opened.

Reports noted that the possibility of a 0.75% increase coincides with traders’ pricing in a more aggressive manner, with stock futures slipping momentarily.

During his speech at the Jackson Hole meeting, Powell stated that the central bank will have to go beyond the neutral rate, which neither supports nor restricts growth. He added that the bank purposefully moved its policy stance to a level that restricts the return of inflation to 2%.

This year, the central bank hiked its interest rate four times to a total of 2.25%, and included two of the most aggressive ones made, of 0.75% in June and July, since the 1990s when it began using the benchmark funds rate as the key policy tool.

Loretta Mester, President of Federal Reserve Cleveland, stated the feds fund rate should go over 4% by 2023 and will remain elevated until inflation is decreased.

Fed officials will be closely monitoring the remaining big data points before the meeting, set to take place between 20th and 21st September.

However, Andrew Hollenhorst, Economist at Citigroup, believes that those reports will affect the future hikes, instead of the September, adding that a three-quarter hike is very likely to happen this month, with markets also shifting focus to the November increment.

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Meghna Singh

An English Literature graduate, Meghna Singh ventured into the profession of content development to incorporate her knack for writing articles across verticals including technology, healthcare, business, and alike for News Origins and Newsorigins. She has also completed her MBA in Tourism and worked as a content creator in the field of product development.