Fed officials may have briefly contemplated an even bigger hike following the news of the further surge in inflation in June but, with inflation expectations dropping back and the incoming news on activity softening, we expect another 75bp hike next week. As that would take the fed funds target range back to between 2.25% and 2.50%, leaving it very close to neutral, we then expect the Fed to slow the pace of tightening with a 50bp hike in September.
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