What will the FED do on the next meeting?
With the job numbers coming in stronger than expected as of lately, what would the FED do? Will they change their decision to 75bps? Will they raise it aggressively to 100bps? Or will they remain at 50bps? My take will be discussed below.
With job numbers way above 200,000 (stronger and higher than expected) and inflation as of the last reading at 7.7% (FED wants the number to be 2%), J Powell, chairman of the FED may take a second look at the rates.
There are 2 things that he can do.
Number 1: first introduce a 50bps to let the market rally and rebound, this would effectively wipeout all their efforts of taming inflation for the past year, and then at the next meeting (in 2023) slap on a 75bps, to bring the markets back down again.
Number 2: continue with either 75bps or introduce the 100bps to take inflation thereby also bringing the markets down further. This would result in steeper and sharper pains ahead, maybe causing a severe recession just like 2008-2009 or even 1929 (depression).
To have a quick recovery, maximum pain has to be dealt. (Think of it as a vaccine to cure a flu)
Do let me know your thoughts below!
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