Investors are uneasy as the Federal Reserve gears up for its latest policy announcement on Wednesday. But their hope is that the central bank and Chair Jerome Powell will keep talking tough, providing a dose of clarity on the path forward at an uncertain moment.
What’s happening: The Fed is expected to hike interest rates by three-quarters of a percentage point as it continues with its ambitious campaign to bring down inflation, which hit a 40-year high in June. There had been some speculation that the Fed could raise rates by a full percentage point for the first time in its modern history, but that now looks less likely.
Even the more conservative option would have major ripple effects.
“That would be unprecedented that we’ve gone with that large a move in two consecutive meetings,” St. Louis Federal Reserve President Jim Bullard said in an interview earlier this month.
And to Wall Street, that’s a good thing. Investors concede that the Fed has a difficult task at hand as it tries to control inflation without raising borrowing costs so aggressively that it tips the US economy into a recession.
But for now, they’d rather the Fed indicate that it plans to stay tough than see it adopt a more accommodating stance. In unstable times, the argument goes, consistency is key.
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