After the US CPI data, a 100 basis point Fed rate hike in September began to be voiced.
Jeffrey Gundlach, known as the bond king, said that contrary to the market’s prevailing view, he favored a 25 basis point increase in interest rates.
After consumer prices increased by 8.3 percent year-on-year, exceeding expectations, economists and investment bank strategists began to emphasize that the Fed should raise interest rates by 100 basis points in September.
Former US Treasury Secretary Larry Summers, who frequently emphasized that the Fed was behind the curve in increasing inflation, argued that inflation could not be brought under control until interest rates approach 4 percent. Summers said the Fed should raise rates by 100 basis points to strengthen its credibility.
Nomura economists also raised their September rate forecast to 100 from 75 basis points. Nomura’s Aichi Amemiya, Rob Dent, and Jacob Meyer expect the Fed to finalize the rate hike cycle in February 2023, 50 basis points higher than previous forecasts, in the 4.50-4.75% band.
On the other hand, Christian Mueller-Glissmann from Goldman Sachs drew attention to the “high and sticky inflation” and said that high returns would affect the valuations of all asset groups.
Swap markets fully priced in the possibility of a 75 basis point rate hike in September after the US CPI data. A 100 basis point rate hike is priced at 20 percent probability.
