Wall Street overwhelmingly expects the Federal Reserve to hike rates later this year, but a few contrarians still insist the opposite will happen.
According to CME’s FedWatch tool, investors have priced in 77% odds that the central bank will lift the benchmark rate by a quarter-point or more by the end of the year.
That’s as the U.S.-Israeli war on Iran sent oil prices soaring, while the recent ceasefire hasn’t seen an equivalent dive in costs. In addition, the AI boom has created a chip shortage that’s making consumer electronics more expensive.
Meanwhile, GDP was revised higher, the job market has also firmed up, and the tsunami of cash tech giants are raising signals monetary policy isn’t that restrictive. And for good measure, Kevin Warsh’s first press briefing as Fed chairman last week stunned Wall Street with his hawkishness, clinching the case for tightening.
On Monday, analysts at Bank of America predicted the Fed would increase rates three times this year as policymakers take more decisive action to rein in inflation after five years of seeing it above their 2% target.
