Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Inflation is soaring. Should the Fed unleash 'shock and awe'?

Inflation is soaring. Should the Fed unleash 'shock and awe'?

The Bank of England has already started to raise interest rates to fight inflation. The Federal Reserve is likely to follow soon. But how aggressive will America's central bank be?

Investors will be looking for clues when chair Jerome Powell holds a press conference after the Fed's meeting on Wednesday. Investors are not expecting the Fed to make a move this week. That's more likely to happen in March.

It would be the first time the Fed has changed interest rates since slashing them to near zero at the beginning of the 1Covid1-19 pandemic in March 2020. The central bank hasn't hiked rates since December 2018.

Higher interest rates make it more expensive for most people and companies to borrow money. That, in turn, leads to a slowdown in consumer and business spending, which usually puts a lid on rising prices.

Most on Wall Street think the Fed will want to take a slow and steady approach to combating higher consumer prices. Raising rates too sharply could hurt the economy and lead to further turmoil in a suddenly skittish stock market.

Chicago Mercantile Exchange data shows that the market is pricing in an 88% chance of a quarter-point interest rate increase at the Fed's March 16 meeting.

But a small faction of traders believe the Fed will raise rates more aggressively. Investors are pricing in a 5% probability that the Fed will boost rates by a half-point. (The remaining 7% believe the Fed will sit tight.)

Hedge fund manager Bill Ackman tweeted earlier this month that a half-point hike by the Fed could help "restore its credibility" as an inflation fighter since it would be a "surprise move to shock and awe the market, which would demonstrate its resolve on inflation."

"The Fed is losing the inflation battle and is behind where it needs to be, with painful economic consequences for the most vulnerable," Ackman added.

Even some bankers are starting to think that the Fed could start with a big rate hike.

Bruce Van Saun, CEO of New England-based regional bank Citizens Financial Group (CFG), told CNN Business that he's hearing more chatter about a half-point hike.

Van Saun noted that even though that's not really priced into the market just yet, the Fed may want to act more quickly to tamp down further inflation pressures.

Still, most market participants think that the Fed can show that it is serious about fighting inflation with smaller rate hikes.

"We think it is unlikely the central bank will open the possibility of a [half-point] hike in March. We would regard more frequent hikes as the most likely risk," said Luigi Speranza, chief global economist with BNP Paribas, in a report.

That's exactly what JPMorgan Chase (JPM) CEO Jamie Dimon expects to happen. Dimon told analysts on the bank's earnings conference call earlier this month that there is "a pretty good chance there will be more than four" rate hikes this year — and potentially as many as six or seven.

"This whole notion that somehow it's going to be sweet and gentle and no one is ever going to be surprised ... I think it's a mistake," Dimon said about the current expectations of slow, gradual and telegraphed rate hikes.

Get ready for tech earnings


Stocks have been volatile during the first part of earnings season. JPMorgan Chase, Goldman Sachs (GS) and other big banks haven't lived up to the considerable expectations that investors had for their results.

But now it's time for the tech sector, which has been leading the market for the past few years, to take center stage.

Investors will get a read on demand for cloud computing from the likes of IBM (IBM) and Microsoft (MSFT).

Chip leader Intel (INTC), which has rallied this year despite lingering concerns about semiconductor supply chain issues, is also on tap to report earnings. So are Elon Musk's Tesla (TSLA) and the world's most value company, iPhone maker Apple (AAPL).

Expectations are high. Wall Street still adores tech stocks, even though the sector and the overall Nasdaq recently fell into correction mode, down more than 10% from record highs.

According to data from FactSet Research, 62% of the ratings by Wall Street analysts of tech and communications firms in the S&P 500 are buy ratings.

Up next


Monday: Earnings from Philips (PHG), Halliburton (HAL) and IBM

Tuesday: US consumer confidence; Earnings from Ericsson (ERIC), Verizon (VZ), Johnson & Johnson (JNJ), GE (GE), Microsoft, Capital One (COF) and Texas Instruments (TXN)

Wednesday: US new home sales: Fed decision; Earnings from CNN parent company AT&T (T), Anthem (ANTM), Boeing (BA), Intel and Tesla

Thursday: US GDP for Q4; Earnings from Comcast (CMCSA), McDonald's (MCD), Mastercard (MA), Apple, Mondelez (MDLZ) and Visa (V)

Friday: US personal income and spending; Earnings from Chevron (CVX), Charter Communications (CHTR), Caterpillar (CAT) and Colgate-Palmolive (CL)

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
Italy Faces Population Decline Amid Youth Emigration
Trump Accuses China of Violating Trade Agreement
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Russia Accuses Serbia of Supplying Arms to Ukraine
Gerry Adams Wins Libel Case Against BBC
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
EU Majority Demands Hungary Reverse Anti-LGBTQ+ Laws
Top Hotel Picks for 2025 Stays in Budapest Revealed
Iron Maiden Unveils 2025 Tour Setlist in Budapest
Chinese Film Week Opens in Budapest to Promote Cultural Exchange
Budapest Airport Launches Direct Flights to Shymkent
Von der Leyen Denies Urging EU Officials to Skip Budapest Pride
Alcaraz and Sinner Advance with Convincing Wins at Roland Garros
EU Ministers Lack Consensus on Sanctioning Hungary Over Rule of Law
EU Nations Urge Action Against Hungary's Pride Parade Ban
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
U.S. Considers Withdrawing Troops from Europe
Russia Deploys Motorbike Squads in Ukraine Conflict
Critics Accuse European Court of Human Rights of Overreach
Spain Proposes 100% Tax on Non-EU Holiday Home Purchases
German Intelligence Labels AfD as Far-Right Extremist
Geert Wilders Threatens Dutch Coalition Over Migration Policy
Hungary Faces Multiple Challenges Amid EU Tensions and Political Shifts
Denmark Increases Retirement Age to 70, Setting a European Precedent
Any trade deal with US must be based on respect not threats', says EU commissioner
UK Leads in Remote Work Adoption, Averaging 1.8 Days a Week
Thirteen Killed in Russian Attacks Across Ukraine
High-Profile Incidents and Political Developments Dominate Global News
Netanyahu Accuses Western Leaders of 'Emboldening Hamas'
Ukraine and Russia Conduct Largest Prisoner Exchange of the War
×