September Fed Rate Hike Unlikely to Repeat 2022-23 Cycle

0438 GMT - The Fed's September rate hike is unlikely to be the beginning a tightening cycle similar to that of 2022-23, despite the market's expectation for two more increases, says BNP Paribas Asset Management strategist Chi Lo. Instead, it likely marks the start of "insurance hikes" aimed at bringing inflation back to target by reversing last year's three rate cuts, he says. Further hikes won't defuse the external shocks such as wars and energy price inflation, but they will dampen financial market concerns about the Fed's inflation-fighting credibility. The Fed can't keep looking through shocks that recur or fail to fade as hoped. However, by slowing activity elsewhere in the economy to cap inflationary pressures, more rate hikes may risk pushing the economy into stagflation.