FOMC Expected to Raise Interest Rates as Inflation Persists

The Federal Open Market Committee (FOMC) is widely expected to raise interest rates this week in response to persistent inflation. Treasury yields have climbed to over 4.6%, up nearly 40 basis points from the FOMC's last meeting at the end of July and more than a full percentage point from the beginning of the year.

According to Bank of America global economist Antonio Gabriel, 'the CPI data last week all but locked in a rate hike this week.' This would be the first hike in three years under Federal Reserve Chairman Kevin Warsh, who many assumed would usher in easier monetary policy.

Derek Tang, head researcher at Monetary Policy Analytics, warns that an unwillingness to explain the rationale behind the decision could create confusion in the markets. 'By declining forward guidance, and without a reaction function to stress the conditionality around the decision, equivocating might sound like unwillingness to hike further,' he said.