Investing.com – The published yesterday has sent shockwaves through the markets, sending stocks, cryptocurrencies, and risk assets generally crashing.
In fact, inflation, which continues to accelerate in the United States, further strengthens the probability that the Fed will persevere in the aggressive tightening of its monetary policy, after three successive rate hikes of 0.75%.
But it is also possible that the Fed will act with even more determination for its next meeting in September, given its failure to contain inflation.
Moreover, the money markets are currently showing that they are taking into account a probability of almost 35% that the Fed will raise its rate by 100 basis points (1%) next week. If the Fed is leaning in this direction, we should probably expect “leaks” in the press over the next few days.
Nomura was also one of the first banks to make the scenario of a 1% Fed rate hike its base case in response to the US CPI, according to an update released last night. The bank also raised its final rate forecast to 4.5-4.75%.
“We believe it is increasingly clear that a more aggressive path of rising interest rates will be needed to combat increasingly entrenched inflation stemming from an overheated labor market, a unsustainable wage growth and higher inflation expectations,” the bank wrote.
Without explicitly forecasting a 1% rate hike next week, Jefferies and Pimco have also raised their terminal rate forecast to 4.5%, and it is to be expected that other banks will revise their rate hike expectations upwards. Fed rate this week.