Calls for a 100 basis point interest rate hike by the Federal Reserve (Fed) are now starting to be heard after markets saw stronger than expected readings in US inflation.
The CME FedWatch tool now shows a 38% probability of a 100 basis point rate hike at next week's FOMC meeting after showing a zero chance over the past month.
Meanwhile, the probability of a rate hike of 75 basis points fell to 62% from 91% the previous day and investors wrote off the possibility of a 50 basis point increase to zero from 9% the previous day.
Among the first to change their outlook for a 100-point increase were analysts from Nomura who had previously expected an increase of 75 basis points.
It says a more aggressive path of interest rate hikes is needed to combat entrenched inflation.
Additionally, Larry Summers, former Treasury Secretary has said that if he were a Fed official, he would choose a 100 basis point move to strengthen credibility.
With inflation still hovering around a 40-year high, it is not out of the question if the Fed takes aggressive steps to return it to the central bank's 2% target.
Annual US inflation surprised markets after unexpectedly posting a stronger-than-expected increase despite falling from the previous month, at 8.3%.
