July Fed Meeting preview：there’s roughly a chance of a 100 bps rate hike
2022-07-18
■ Due to the FRB’s tighten financial conditions, global interest rate hikes accelerated and the US-pricing-pressure also expands.
■ Same as June, there’s probability that interest rate is revised during the break down.
Hiking Interest rate is the most appropriate way for the FOMC in July. According to the FRB Waller speaks till July 7, there’s a 75bps rate hike in July. But during the week this report has been written, the probability of a 100bps rate hike in July has emerged. There’s 2 points that lead to this change. That is (1) after entering July, rate hikes accelerated in the worldwide (2) CPI date in June.
(1) Until July 4, there’re at least 15 central banks have raised interest rates. Among them, like Philippines and Singapore, they announced tighten financial after holding extraordinary policy meetings. And, as for Canada, this the first time from 1998 that rate hikes 100bps.Especially, Canada central bank is the first bank which raises interest rates by 100bps in G7 countries. This is a major factor that FOMC would have a 100bps rate hike in July.
(2) is announced in July 13, comparing with the previous year, the composite index up 9.1% from the previous year. This is the most significant growth from November, 1981. In addition, excluding highly variable foods and energy, Core index up 0.7% from the previous month. Pricing-pressure is confirmed that has been spreading throughout the economy. It leads to interest rate hikes considerably.
From July 16 till the ending of FOMC(July 26/27), FRB senior officers won’t refrain from making statements related to monetary policy called [black out time]. In retrospect, just before the last June FOMC meeting, US major media has reported that rate hike has been revised from 50bps to 75bps. And as above, the pace of interest rate hike has accelerated more significantly in the worldwide recently. Comparing with the previous, FOMC may revise the range of rate hike once again in July. Therefore, we believe that investors should be prepared for the unstable state in the market all the time.