Analysts Suspect the Fed Will Bump Federal Funds Rate by 75 bps Next Week, Others Predict the ‘Biggest Hike in Decades’ – Economics Bitcoin News

Many expect that the Federal Reserve will raise the benchmark rate of interest by 75-100 basis points (bps), following the U.S. Consumer Price Index report which indicated an inflation spike in America at 40 years. Blackstone’s Private Wealth Solutions expects the Fed to raise the rate by 75 bps and bankrate.com believes a three-quarter rate hike is in the cards as well.

All Eyes on the Fed’s Next Move — Market Strategists Predict a 75 to 100 bps Interest Rate Hike Next Week

The U.S. central banking will hold a meeting next week (roughly six days) to change and assess the federal funds rate. Since March 2022 the Federal Reserve had been increasing its benchmark rate. The benchmark rate was raised by the Federal Reserve in March from near zero to 0.255%, its first increase since 2018. The Fed raised the benchmark interest rate from near zero to 0.25% in March. However, inflation continued rising and JPMorgan economists forecast that the Fed would increase the rate 75 basis points by June.

On June 15, 2022, the U.S. central banks raised its federal funds rates by 75 bps. This was in line with the forecast rate increase. America hadn’t seen 75-bps increases since 1994, when Alan Greenspan was the thirteenth chairman of the Federal Reserve. The country was then managed by Bill Clinton, a Democrat president. Inflation was very low at 2.7%. However, there were many people who at that time believed Greenspan was often too hawkish. Also, market indices had begun to become volatile.

Before Greenspan’s infamous 75 bps rate hike, the tech giant Cisco Systems saw a 16% decline in value and dropped 54% up until October 1994. Applied Materials saw a 30% correction in shares, while EMC suffered a similar drop. Abby Cohen (Goldman Sachs’ investment strategist) noted that nearly 40% of active stocks fell more than 30% from 1994’s peak. Greenspan started to tighten monetary policy, and the investment strategist at Standard & Poor, Arnold Kaufman, said at the time that the U.S. economy would rebound in 1995.

“We don’t see this as a bear market,” Kaufman explained that year. “The difference is that we’re buying the ‘soft landing’ concept [for the economy], while others are not.”

Kaufman was right. The U.S. economy grew and the market indices became less volatile. They began rising steadily in 1995. Jerome Powell (the 16th chairman of the Federal Reserve), seems to still be on ahawkish mode 27 years after the March rate increase. While inflation continues to print perpetual highs, Powell thinks that current price pressures will dissipate fast, and the central bank’s chair believes the Fed can tame the scorching hot inflation.

Blackstone Pencil at Bankrate.com Pencil with a 75bps Rate Hike; Others Are Expecting a 100bps Jump

Currently, the chief investment strategist in Blackstone’s Private Wealth Solutions group, Joseph Zidle, believes a 75 bps rate hike will happen next week. “My own view is the Fed funds rate could exceed 4%. I think they could go above 4.5%, maybe even closer to 5%,” Zidle told Bloomberg during an interview. In addition to Blackstone’s guess, bankrate.com is also predicting a 75 bps increase during the next Fed meeting. Bankrate.com says that the U.S. central bank’s policymakers “show no signs of stopping.” The financial bank rate comparison website added:

New forecasts released along with the June decision also show that the federal funds rate will be 3.25 to 3.5 percent by 2022. This is the highest level since 2008.

However, some predict a 100 basis point increase. “With inflation so hot, the Fed’s next rate hike might be the biggest in decades,” a report published by Barron’s notes and details the next rate bump could be 1%. Furthermore, other sources stemming from the likes of CBS, and CNBC, indicate that a 100 bps raise will be announced next Wednesday at the Federal Open Market Committee’s (FOMC) monthly meeting.

How do you expect the Fed to behave at the next FOMC Meeting? Are you expecting a 75-bps or 100-bps rate increase next week? Please share your views on this topic in the comment section.

Jamie Redman

Jamie Redman is the News Lead for Bitcoin.com News. He also lives in Florida and works as a journalist covering financial technology. Redman joined the cryptocurrency community in 2011 and has been active since then. Since 2011, Redman has been an active member of the cryptocurrency community. Redman has contributed more than 5700 articles to Bitcoin.com News since September 2015. These articles are about disruptive protocols that are emerging.