Nomura expects Fed to raise interest rates by a full percentage point next week
Nomura economists expect the Federal Reserve to raise interest rates by a full percentage point next week after August’s hotter-than-expected consumer inflation report. The economists had previously expected a 75 basis point hike, which is the consensus view of economists. A basis point equals 0.1 of a percentage point. The economists announced the change after the August consumer price index came in up 0.1% month over month , while economists polled by Dow Jones had expected a decline of 0.1%. The Nomura economists said “the broad-based strength across both monthly core goods and core services inflation — suggests a series of upside inflation risks may be materializing.” Therefore, they see the Fed responding more forcefully. In the futures market, the odds were about 16% that the Fed would hike by a full percentage point, following the CPI report. “Beyond September, we continue to expect a 50bp hike in November, but now anticipate another 50bp hike in December, 25bp higher than our previous forecast. With our February 2023 expectation of a 25bp hike unchanged, our terminal rate forecast now stands at 4.50-4.75%, 50bp higher,” they wrote. In the futures market, traders were anticipating a terminal rate of 4.29%. The terminal rate is the end point, where the Fed stops hiking rates. — CNBC’s Michael Bloom contributed reporting. This post has been syndicated from a third-party source. View the original article here.