Investors fear two outcomes, neither of them good: Higher rates mean bigger borrowing costs for businesses, which can eat into their bottom lines. Stovall said the risk of larger hikes dragged the markets lower Monday. “After holding their breath for nearly a week awaiting the US CPI report for May, investors exhaled in exasperation as inflation came in hotter than expected,” Sam Stovall, chief investment strategist at CFRA, said in a note to clients Monday morning. Jefferies joined Barclays on Monday in predicting that the Federal Reserve would hike rates by three-quarters of a percentage point, an action the Fed hasn’t taken since 1994. At that point, the Fed would resume standard quarter-point hikes, he said.īut after May’s hotter-than-expected inflation report, Wall Street is increasingly calling for tougher action from the Fed to keep prices under control. The Fed may have to do something it hasn't done since 1994 to tame inflationĪfter raising rates by a half point in May - an action the Fed hadn’t taken since 2000 - Chair Jerome Powell pledged more of the same until the central bank was satisfied that inflation was under control. Federal Reserve Chairman Jerome Powell meets with President Joe Biden meets and Treasury Secretary Janet Yellen in the Oval Office of the White House, Tuesday, May 31, 2022, in Washington.
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