US Fed expected to raise rate by 100 basis points next week: Nomura
Nomura Holdings analysts expect the US Federal Reserve to raise the interest rate by 100 basis points next week after a higher than expected inflation rate in August at 8.3 per cent.
Earlier, analysts from Nomura and other financial institutes estimated the Fed would hike the rate by 75 basis points during their September 20-21 meeting, which would be the third consecutive hike by 0.75 per cent since June.
Nomura had also estimated the Fed would hike rates again in November and December, at 0.50 per cent on both occasions, and then again by 0.25 per cent in February 2023.
Reuters reported on Tuesday that traders have been ramping up their 100-basis-point bets all day, since the US Labour Department earlier on Tuesday released a hotter-than-expected August Consumer Price Index report that looked destined to cement an aggressive stance by the Fed.
The CPI climbed 0.1 per cent last month from July and gained 8.3 per cent in the 12 months through August, the Labour Department reported.
Meanwhile, the basic CPI, which excludes food and energy, rose 6.3 per cent in August, higher than analysts’ 6.1 per cent estimation.
Meanwhile, CME Group’s FedWatch Tool stated investors weighted 22 per cent probability that the US central bank would hike the interest rates by 100 basis points to 3.25-3.5 per cent in its September meeting, and a 78 per cent probability that the rates would be raised by 75 basis points. Earlier, no investors had believed the rate hike would reach a full percentage point.
The Fed still has three policy meetings scheduled for this year – September 20-21, November 1-2, and December 13-14.
