- A Wells Fargo strategist stated that the Federal Reserve should reconsider a rate increase of 150 basis points.
- “Why not just rip off the Band-Aid — let’s get there in one day,” Michael Schumacher told CNBC.
- Most economists anticipate that the Fed will raise interest rate 75 basis points after Wednesday’s meeting.
The Federal Reserve should hike interest rates by 150 basis points — even though that would likely spark “carnage” in stocks, a top Wells Fargo strategist has said.
The majority of economists believe that the US central bank will announce another 75 basis point jumbo rate increase at its two-day meeting on Wednesday.
But given the Fed likely wants to raise its base rate from 2.5% to 4%, it should consider getting there by making one even more supersized hike in its September policy decision, Michael Schumacher CNBCTuesday
“The Fed knows the destination. “Fast Money” featured the Wells Fargo Securities’ head macro strategy.
He said, “Very likely it goes to 4% or more this year.”
“Why not just rip off the Band-Aid — let’s get there in one day.”
In an attempt to curb inflation, the central banking raised interest rates 75 basis point at its two previous meetings consecutively. Highs near 40 years.
Schumacher stated that a 150-basis point increase in interest rates is unlikely because of the shock it could cause to the markets. Stocks have fallen due to the S&P 500Investors questioned whether Fed’s aggressive tightening could lead to a US recession, which led to a decline of 19.3% in year-to-date.
“The big fear in the market would be, ‘Oh my goodness, they’ve done a record-sized move — what’s going to happen next month or the month after that?'” Schumacher stated.
“It would take incredibly good communication, confidence, or the end: Carnage. That is what nobody wants.”
Market still face turbulence in coming months from the central bank’s unwinding of the loose monetary policies in place since the 2008 financial crisis, according to Schumacher.
He said, “When you look at the past 10-plus years we’ve had an incredibly easy monetary policies for most of that period.” “Super-stimulative fiscal policies in many cases, especially the US.”
“So, doing a very quick U-turn — I suspect it’s going to be very rocky,” he added. “To imagine that it would somehow flow smoothly from there is probably a huge leap.”
US stock futures saw a slight rise at the open on Wednesday, ahead Fed’s decision. This was after major indexes had been released. Closed approximately 1% lower Tuesday. S&P 500 futuresThey were up 0.2% Nasdaq futuresThe increase was 0.08% Dow Jones Industrial Average futuresAdditional 0.2%
