Last Friday, we warned in our Data Response to May’s CPI report that the unexpected rise in headline inflation opened the door to a 75bp rate hike by the Fed this Wednesday. Media reports this afternoon suggest the Fed will indeed hike by 75bp at this week’s FOMC meeting and there is a good chance that the Fed will follow up with a second 75bp hike in July, taking the fed funds target range to between 2.25% and 2.50%, which is in line with the Fed’s estimate of neutral.
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