Felipe Villarroel at TwentyFour Asset Management says the Fed faces a difficult
trade-off: inflation remains above target and recent Middle East tensions and
Higher oil prices add upside risk, while the US economy remains resilient.
Markets price a 25bp hike Wednesday; TwentyFour sees that as the most likely
outcome. Villarroel says the speed at which inflation returns to target matters
more than its current level because a rapid decline is needed to prevent
inflation expectations from becoming entrenched. He adds recent comments by Fed
chair Kevin Warsh show a strong focus on restoring the Fed's anti-inflation
credibility, but this meeting will be the first to show how that concern is
reflected in policy.
