Economists Push for Surprise Rate Hike as Inflation Persists

Economists are calling for Federal Reserve Chair Kevin Warsh to raise interest rates at today's meeting, arguing that the central bank's 2025 cuts left policy too loose. Joe Lavorgna, chief economist for the Americas at SMBC Nikko Securities America, says the Fed should reverse part of last year's easing now that the labor market has stabilized.

Lavorgna points to core Personal Consumption Expenditures (PCE) inflation, which has been above the 2% target for years. He argues policy isn't tight anywhere except housing, and even there it makes up only about 3% of the economy. Dallas Fed President Lorie Logan has echoed this hawkish tilt.

Traders on the CME FedWatch tool have priced hike odds near 38%, well below a coin flip. This suggests that most economists still expect a hold, but some are calling for a surprise hike to tighten financial conditions and weigh on risk assets, including crypto and DeFi tokens.