Wall Street is bracing for the Federal Reserve to raise interest rates from near-zero in June after President Biden on Monday picked Jerome Powell to lead the central bank for another four years.
Following the announcement, a majority of traders are pricing in at least a 25-basis point hike in June, according to the CME’s FedWatch tool, and about a 62% chance of three modest rate increases over the course of 2022. Another 32% are projecting a fourth rate hike in December.
“The economy is experiencing an increase in inflation, and the Fed has already taken steps to reduce their extraordinary stimulus measures, but they will need to move more quickly in addressing the inflation threats so that they don’t become entrenched,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
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Powell, who was first nominated in 2017 by then-President Donald Trump, will be faced with critical policy decisions over the course of his second, four-year term. Consumer prices have soared by 6.2% over the past year, sparking fears about runaway inflation, raising questions about how central bank policymakers may respond as Americans pay more for everything from meat to clothing to gasoline.
