# Fed officials still leaning to 75-basis-point rate hike in July
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-07-15
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Federal Reserve Officials Signal Likely 75-Basis-Point Rate
Meta Description: St. Louis Fed President Bullard and Atlanta Fed President Bostic signal cautious approach to interest rate hikes in response to recent high inflation reading.
URL: https://financedigest.com/fed-officials-still-leaning-to-75-basis-point-rate-hike-in-julyhtml

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By Howard Schneider and Lindsay Dunsmuir

TAMPA, Fla. (Reuters) – Federal Reserve officials signaled on Friday they will likely stick with a 75-basis-point interest rate increase at their July 26-27 meeting, though a recent high inflation reading could still warrant more, or faster, increases later in the year.

St. Louis Fed President James Bullard said the “hot” 9.1% inflation reading for June warrants [pushing the target federal funds](https://www.financedigest.com/in-renewed-push-spain-to-tender-eu-funds-for-evs-batteries-in-july.html "In renewed push, Spain to tender EU funds for EVs, batteries in July") rate to a range of between 3.75% and 4.00% by the end of this year, a half percentage point higher than his prior year-end aim.

“The Fed has to react … charting out a course that is somewhat more aggressive over the [second half of this year,” Bullard said at an event organized by the European Economics & Financial Centre in London](https://www.financedigest.com/new-york-holds-top-spot-london-second-in-z-yen-financial-centre-survey.html "New York holds top spot, London second in Z/Yen financial centre survey").

But he also said he was indifferent about whether the U.S. central [bank should approve a 0.75-percentage-point rate](https://www.financedigest.com/instant-view-ecb-sticks-with-big-rate-hike-even-as-bank-fears-roil-markets.html "Instant View: ECB sticks with big rate hike even as bank fears roil markets") increase this month, as policymakers have flagged, or boost that to a full percentage point.

“It probably doesn’t make too much difference to do 100 basis points here and less in the other three meetings (in 2022) or to do 75 basis points here and slightly more in the remaining three meetings of the year,” Bullard said.

In separate comments at a forum organized by the Tampa Bay Business Journal, Atlanta Fed President Raphael Bostic cautioned against the central [bank moving “too dramatically” because it could undermine the strong hiring and other positive trends still seen in the economy](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates").

While Bostic did not explicitly endorse a 75-basis-point increase at this month’s meeting, his comments seemed to lean away from a larger [rate hike](https://www.financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hike.html "Stocks falter as economic worries nag, NZ delivers big rate hike") in July.

Their remarks are the last before policymakers enter a “blackout” period in which they are supposed to refrain from public statements in the week before the [central bank’s](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") policy-setting Federal Open Market Committee gathers in Washington.

BASE CASE

Both Bostic and Bullard reiterated the [Fed’s firm commitment to raising interest rates](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") as high as needed to control inflation, with Bostic saying “if the economy moves in a way that is consistent with us getting to our 2% (inflation) target then we will stop. And if it doesn’t we won’t.”

Traders in futures contracts tied to the Fed’s short-term federal funds policy [rate](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up") shifted their bets firmly in favor of a 0.75-percentage-point increase at the upcoming meeting following the two Fed officials’ remarks. Traders had been [leaning toward a full-percentage-point jump since the Labor Department reported on Wednesday that consumer prices](https://www.financedigest.com/france-leans-on-retailers-to-help-consumers-cope-with-food-prices.html "France leans on retailers to help consumers cope with food prices") rose at an annual pace of 9.1% in June, the largest increase in more than four decades.

On Thursday, [Fed Governor Christopher Waller also said a 0.75-percentage-point rate hike](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") remained the base case for this month’s meeting, though he noted that could be trumped by further economic data.

Economic data released on Friday seemed to push against a rush to larger [rate hikes](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil").

Retail sales rebounded in June, though they were down slightly on an inflation-adjusted basis, while a New York Fed manufacturing index registered unexpected gains – evidence the economy was largely holding up in the face of the [Fed’s three rate hikes](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike") this year.

Meanwhile, a closely watched measure of consumer inflation expectations improved in June, a welcome development for Fed officials [worried they were losing control of the public inflation](https://www.financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worries.html "BoE’s Bailey says rate-setters can put inflation before bank worries") outlook and would need to act more aggressively to keep it “anchored.

(Reporting by Howard Schneider and Lindsay Dunsmuir; Editing by Paul Simao)


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