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
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Man Convicted of Fraud After Booking Over 120 Free Flights Posing as Flight Attendant
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
Beata Thunberg Rebrands as Beata Ernman Amidst Sister's Activism Controversy
Hungarian Parliament Approves Citizenship Suspension Law
Prime Minister Orbán Criticizes EU's Ukraine Accession Plans
Hungarian Delicacies Introduced to Japanese Market
Hungary's Industrial Output Rises Amid Battery Sector Slump
President Sulyok Celebrates 15 Years of Hungarian Unity Efforts
Hungary's Szeleczki Shines at World Judo Championships
Visegrád Construction Trends Diverge as Hungary Lags
Hungary Hosts National Quantum Technology Workshop
Hungarian Animation Featured at Annecy Festival
Israel Issues Ultimatum to Iran Over Potential Retaliation and Nuclear Facilities
UK and EU Reach New Economic Agreement
Coinbase CEO Warns Bitcoin Could Supplant US Dollar Amid Mounting National Debt
Trump to Iran: Make a Deal — Sign or Die
Operation "Like a Lion": Israel Strikes Iran in Unprecedented Offensive
Israel Launches 'Operation Rising Lion' Targeting Iranian Nuclear and Military Sites
UK and EU Reach Agreement on Gibraltar's Schengen Integration
Israeli Finance Minister Imposes Banking Penalties on Palestinians
U.S. Inflation Rises to 2.4% in May Amid Trade Tensions
Trump's Policies Prompt Decline in Chinese Student Enrollment in U.S.
Global Oceans Near Record Temperatures as CO₂ Levels Climb
Trump Announces U.S.-China Trade Deal Covering Rare Earths
Smuggled U.S. Fuel Funds Mexican Cartels Amid Crackdown
Austrian School Shooting Leaves Nine Dead in Graz
Bezos's Lavish Venice Wedding Sparks Local Protests
Europe Prepares for Historic Lunar Rover Landing
Italian Parents Seek Therapy Amid Lengthy School Holidays
British Fishing Vessel Seized by France Fined €30,000
Dutch Government Collapses Amid Migration Policy Dispute
UK Commits to 3.5% GDP Defence Spending Under NATO Pressure
Germany Moves to Expedite Migrant Deportations
US Urges UK to Raise Defence Spending to 5% of GDP
Israeli Forces Intercept Gaza-Bound Aid Vessel Carrying Greta Thunberg
IMF Warns of Severe Global Trade War Impacts on Emerging Markets
Low Turnout Jeopardizes Italy's Citizenship Reform Referendum
Transatlantic Interest Rate Divergence Widens as Trump Pressures Powell
EU Lawmaker Calls for Broader Exemptions in Supply Chain Legislation
France's Defense Spending Plans Threatened by High National Debt
European Small-Cap Stocks Outperform U.S. Rivals Amid Growth Revival
Switzerland Proposes $26 Billion Capital Increase for UBS
×