Federal Reserve expected to hike interest rates in October as inflation fight intensifies

The Federal Reserve just raised interest rates for the first time in three years, and Wall Street is already pricing in more pain. After the FOMC unanimously voted to lift the federal funds target range by 25 basis points to 3.75%-4.00% on September 16, major banks are now lining up behind the expectation that October will bring another hike. Goldman Sachs projects a 25 basis point increase at the October 27-28 FOMC meeting. Bank of America is even more aggressive, forecasting hikes at both the October and December meetings. What the data says Market-implied probabilities currently put the odds of an October rate hike somewhere between 45% and 53%. The December meeting, scheduled for December 8-9, carries much stronger odds, with probabilities ranging from 70% to 89%. The September decision wasn’t a squeaker. All 12 voting members backed the hike, and 16 of 18 Fed officials project at least one more increase before the year ends. The median year-end rate forecast sits at 4.1%, which implies the committee broadly agrees that rates need to go higher from here. Fed Chair Kevin Warsh framed the move as necessary urgency. The central bank’s 2% inflation target remains the North Star, an...