September 12, 2022 — Fed Expected to Raise Rates Another 0.75 Percent next Week


The Fed is on the path to raise rates by 0.75 percent this month at their September 20-21 meeting. According to the CME Group, there is a 75 percent probability that rates will go up by that much. 

Powell’s August speech at Jackson Hole indicated he wanted it understood the Fed was focused on taming inflation. Fed Vice Chair Lael Brainard reiterated last week that rates need to go up and will stay at levels for as long as it takes to bring down inflation. The Fed needs to balance the risks of raising rates too much with the risk of cutting rates too soon after economic growth slows. The Fed sees entrenched inflation more worrisome than rates rising too much.

This month’s meeting should indicate how the Fed plans to get to their targeted rate of 4 percent by year end. There will be two more Fed meetings in 2022 after September; an aggressive approach would raise rates higher now, followed by two smaller increases later. The Fed likely wants to get ahead of the curve now, rather than falling further behind.

The European Central Bank raised interest rates by 0.75 percent last week, its second hike this year, following a 0.5 percent increase in July; more rate hikes are expected in Europe later this year. Canada also raised rates by 0.75 percent last week, bringing rates to 3.25 percent, a 14-year high.