Following June’s CPI Index report, many analysts and economists believe that a 100 basis point interest rate hike is about 80% likely, according to Fed futures.

On July 14, Fed Governor Christopher Waller spoke at an economics conference in Idaho where he explained that a 75 basis point hike is almost certain to happen and that he is open to increasing it even more.

We have important data releases on retail sales and housing coming in before the July meeting. If that data comes in materially stronger than expected, it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down,” Waller shared in his address.

While Waller is open to a 100 basis point increase, he believes that market prices are “kind of getting ahead of itself” and he is going into the July meeting expecting only a 75 basis point hike. 

At the Fed’s June meeting, the Board of Governors decided to raise rates by 75 basis points marking the largest one-month hike since 1994. If the Fed decides to raise rates by 100 basis points in July, it would be the largest hike since the early 1980s when the agency was trying to slow runaway inflation. 

Waller also shared that due to the strength of the job market, he is “feeling fairly confident that the U.S. economy did not enter a recession in the first half of 2022 and that the economic expansion will continue.”

Overall, it seems that Waller is confident in the U.S. economy and is warning economists that assuming the economy is in a recession could cause harm to markets.  

Photo: Courtesy of Unsplash


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