This week he is fed to put a ‘strong foot on the brake pedal’

The Federal Reserve is expected to raise interest rates by 0.75 percent this week in an effort to slow the economy to slow inflation.

“What the Fed was doing earlier this year was taking its foot off the gas pedal,” said Carl Riccadonna, chief U.S. economist at BNP Paribas. “This is 75 [bp] Moving is a firm foot on that brake pedal.

The massive hike would bring the Fed’s policy rate to 3% to 3.25% – a level that Fed officials believe will start to constrain economic growth.

Markets are pricing in the slim possibility of a 100-basis-point move, but economists remain skeptical.

“We doubt there’s an agreement at the FOMC to go that far and accelerate the rate of tightening,” said Sam Bullard, senior economist at Wells Fargo.

The Fed will announce its decision on interest rates at 2pm on Wednesday. The central bank will release its latest economic forecasts and Fed Chair Jerome Powell will hold a press conference starting at 2:30 p.m.

Read: The Fed is ready to tell us how much ‘pain’ the economy will suffer.

Economists expect Powell to talk tough on inflation after last week’s surprisingly fresh consumer price index for August. Core inflation rose 0.6 percent in August, dimming hopes that inflation is slowing.

“I believe Powell has no choice but to repeat the strong tone conveyed by Jackson Hole, which could be interpreted as too hawkish,” said Stephen Stanley, chief economist at Amherst Pierpont.

In a speech in Jackson Hole, Wyo., in late August, Powell acknowledged the possibility of economic trouble, saying, “High interest rates, slow growth and soft labor market conditions will cause inflation, some pain for families and businesses.” These are the unfortunate costs of deflation. But failure to restore price stability will cause more pain.

Read: The Nobel Prize winning economist says the Fed should go slow

Stocks were hit last week, with the Dow Jones Industrial Average DJIA;
It is down 4.1%.

Treasury yields rose sharply, with yields on the 2-year Treasury note TMUBMUSD02Y;
It has reached a nearly 15-year high.

Strategists think the Fed will not be covered by the expanding selloff.

Read: The Fed can tame inflation without crashing the stock market.

Economists are busy revising inflation and the Fed’s policy day forecast.

Michael Ferroli, chief U.S. economist at JP Morgan, raised his forecast for the federal funds rate in early 2023 to 4% to 4.25%.

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