Fed door open to 0.75% hike after inflation data, market moves

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WASHINGTON: Eroding inflation data and fast-changing views in financial markets on Monday (Jun 13) have opened the door to a larger-than-expected 0.75 percentage point interest rate increase when Federal Reserve officials meet this week. It is a move officials had downplayed as their two-day meeting a

Meanwhile, on Friday and Monday, an array of measures of inflation expectations moved in the wrong direction for a Fed that has said it is particularly sensitive to losing a grip on public psychology around price pressures.

A decision will not be made until the close of the meeting on Wednesday after what is likely to be a full debate about the risks that faster rate hikes might tip the economy into a recession, and the risks they might pose to the Fed's own credibility after leaning hard on half-point increases as adequate for now.

In this case, data shifting the inflation outlook came in at a time when Fed officials were proscribed by internal rules from speaking out publicly on how it affected their outlook.

 

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