Investors have largely priced in the Fed’s first rate increase in three years
next week, Timiraos writes, but the key question is what comes after. He notes
few Fed officials think a single 25bp hike will be sufficient to curb inflation;
a move would more likely signal policy was previously too low. Since the 1990s
the Fed has only once delivered a true one-off hike. A Fed official said in July
he does not expect the central bank to be effective at “fine‑tuning” and sees
little evidence yet that borrowing conditions are constraining activity. If that
becomes the rationale for tightening, markets will press on how high rates must
go; without clear guidance a lone hike could be interpreted as the start of a
larger tightening cycle. Investors no longer view September as a likely one-off;
market pricing now implies at least three cumulative hikes by June next year, up
from two previously expected.
