The Federal Reserve looks set to go ahead with another big interest rate hike in three weeks and a continuation of it this year and early next year, after government reports showed inflation was very high last month despite the historically aggressive rate of monetary policy tightening so far. this year .
Before another inflation report was released, futures market players had expected a fourth consecutive 75 basis point increase at the close of the Nov. 1-2 Fed meeting.
On Thursday they also began pricing in about a one-in-10 chance of a full percentage point rate hike next month. Towards the end of the year traders see the Fed's policy rate at 4.5%-4.75%, up from the current 3%-3.25%, and topping out in the 4.75%-5% range by March next year.
The surge in rate hike expectations follows a Labor Department report that showed inflationary pressures were mounting in September, with the consumer price index jumping 0.4% in a month. From the previous year prices rose 8.2%, well above the Fed's 2% target.
Fed policymakers have driven interest rates up sharply this year, from near-zero rates to what we see now. In the past month, policymakers have surprised markets again by signaling that they will continue to raise rates into next year and then keep them there until at least the end of 2023.
Since that meeting, many policymakers have emphasized that they will not let up on interest rate hikes until they see progress on inflation, which is eroding Americans' purchasing power at a faster rate than in 40 years.
"If we don't see signs that inflation is moving down, my view continues to be that a substantial increase in the target range for the federal funds rate should remain on the table," Fed Governor Michelle Bowman said on Wednesday, before the inflation report was released.
