THE BASIS POINT

Inflation Fight Update: Politicians squawk while Fed signals 50 basis point hike March 22

 
 

Fed chair Jay Powell’s testimony on Capitol Hill today was met with the typical theater and campaign message points by Senators on both sides of the aisle.

Politicians blame the other side and the Fed, which has the thankless job of squashing inflation anyway, which is all both sides really want.

To do so, it’s very probable the Fed would hike overnight bank to bank lending rates 50 basis points at the conclusion of their next FOMC meeting March 22.*

The reason is all over the headlines: upside inflation surprises continue — see chart above.

Political bluster aside, the Fed is doing well holding the line on an incredibly difficult job.

Everyone’s a critic, but again, everyone has the same goal to lower inflation.

So the GOP senators who say profligate spending are wrong because ALL politicians have big spending priorities.

And the Dem senators who say the inflation fight will ruin the job market are wrong because it ignores the reality of needing to kill inflation — and the fact that unemployment is at a 50-year low.

There’s no sound argument to support runaway inflation.

As for whether you can afford a home in today’s wintry inflation climate, see second link below.

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Reference:

Fed’s Powell opens door to higher & possibly faster rate hikes (Reuters)

Inflation fuels mortgage rate spike from 6% to 7% in Feb. What can you afford?

* Markets were priced for 25 basis point, but Reuters now reports (first link above) a 70% probability of a 50 basis point hike. And as my friend Matt Graham at Mortgage News Daily reminded me, the 50 basis point hike would only happen IF Friday’s February jobs report and the March 14 CPI inflation report for February come in hotter than expected. Janaury jobs and inflation data came in hotter, which led top rates spiking in February, as the second link above describes.

 

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