Economist Mateos y Lago from BNP Paribas suggests the Federal Reserve may need to implement three interest rate hikes. This forecast contradicts the general market consensus, which currently expects the central bank to keep rates unchanged.
The federal funds rate is currently set between 3.50% and 3.75%, with an effective rate of 3.63%. The bank's more hawkish outlook has prompted market participants to reassess their expectations regarding future monetary policy.
Following the announcement, prediction markets adjusted their forecasts for the upcoming Federal Open Market Committee meeting on September 15–16. The probability of a rate hike at this meeting increased to 59.5%, up from 54% recorded 24 hours earlier.
Market participants are also monitoring the potential for a rate increase in October. Investors are currently focusing on upcoming inflation data and statements from Fed Chair Jerome Powell, as these factors will influence the likelihood of further policy tightening.
