James Picerno | Jun 16, 2022 09:44AM ET
The Federal Reserve’s 75-basis-point hike for its target rate on Thursday—the biggest increase since 1994—signals that the central bank is increasingly committed to fighting inflation.
The FOMC statement was certainly clear on intent:
“With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong.”
The challenge is that intent remains well behind current pricing conditions. Consumer inflation, running at an annual 8.6% in June, is far above the revised Fed funds rate, which is now at a 1-1/2-to-1-3/4% range. That implies a series of aggressive hikes in the months ahead. Not surprisingly, Fed funds futures are projecting another 3/4 percentage-point hike for the July FOMC meeting.
Note, however, that the 10-year Treasury yield eased yesterday (June 15) for the first time in more than a week, settling at 3.33%. One day could be noise, but the market may be starting to consider the implications of ongoing rate hikes in terms of the effect on the economy.
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