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Chart courtesy of CME Fedwatch, annotations by Mish.

July Rate Hike Synopsis 

Yesterday, the market penciled in a three-quarter point hike. Today, the market expectation is for a full point hike.

The WSJ notes that would be the largest hike since the Fed started directly using overnight interest rates to conduct monetary policy in the early 1990s.

• “Everything is in play,” Atlanta Fed President Raphael Bostic told reporters in St. Petersburg, Florida, on Wednesday after US consumer prices rose a faster-than-forecast 9.1% in the year through June. Asked if that included raising rates by a full percentage point, he replied, “it would mean everything."
• Cleveland Fed President Loretta Mester, speaking Wednesday evening in an interview on Bloomberg Television: “What I take from the report, and it was uniformly bad -- there was no good news in that report at all -- is that inflation remains at an unacceptably high level,” she said. “We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner.”

Word of the Day is Hot

Today, the BLS reported the CPI rose 1.3 percent in June. Year-over-year prices rose 9.1 percent, a new four-decades high.

Both were well above what economists expected. And economists did not expect anything good. 

For discussion, please see Consumer Price Index Jumps Another 1.3 Percent, Much More Than Than Expected

Also note No Matter What's in Your Food Basket, the Price Keeps Rising Fast

Commodity prices are plunging, but except for gasoline, there is often little correlation to consumer prices.  

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