Fed Chair Powell: Another 0.75% Rate Hike On The Table For July

Zinger Key Points
  • The Fed's previous plans were insufficient to ease inflation fears, says Allianz exec Charlie Ripley.
  • "The reality is the Fed will have to do more to pour cold water on this red-hot inflation environment."

The SPDR S&P 500 ETF Trust SPY traded higher in a volatile session on Wednesday following the Federal Reserve's largest interest rate hike since 1994.

The Federal Open Market Committee opted to raise fed funds rates by 0.75% on Wednesday to a new target range of between 1.5% and 1.75%, and Fed Chair Jerome Powell said another 0.75% rate hike is on the table for the next Fed meeting in July.

Related Link: Federal Reserve Raises Interest Rates by 0.75%, Hikes Inflation Estimates: What Investors Need To Know

“From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting,” Powell said at his post-meeting press conference Wednesday.

“We anticipate that ongoing rate increases will be appropriate.”

Powell said the Fed will continue to monitor economic data and adjust its monetary policy actions accordingly.

“Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common," Powell said.

The updated Fed dot plot projections indicate members see the fed funds rate reaching 3.4% by the end of 2022 and continuing to rise to 3.8% in 2023.

Voices From The Street: Charlie Ripley, senior investment strategist for Allianz Investment Management, said the Fed's previously planned approach of a series of 0.5% rate hikes was simply not enough to ease fears over inflation.

"Recent inflation data has been going the opposite direction of the Fed’s forecast and the reality is the Fed will have to do more to pour cold water on this red-hot inflation environment," Ripley said.

John Lynch, chief investment officer for Comerica Wealth Management, said investors can expect more weakness ahead from the S&P 500.

"We think bonds at current levels have priced these [recession] risks, yet equities are likely to test new lows. We look for the S&P 500 to ultimately find support in the 3,500 range," Lynch said.

The Last Word: Jeffrey Roach, chief economist for LPL Financial, said the Fed is powerless to address ongoing supply chain disruptions that are contributing to inflation.

"Adding to its growing list of problems, the Federal Reserve affirmed its stance that supply chain disruptions are adding to the upward pressure on inflation and we know that is a thorn in their side," Roach said.

Posted In: Allianz Investment ManagementCharlie RipleyComerica Wealth ManagementJeffrey RoachJerome PowellJohn LynchLPL FinancialAnalyst ColorNewsEcon #sEconomicsFederal ReserveAnalyst Ratings