BlockBeats news: On June 17, Frank Flight, Head of Macro Strategy at Citadel Securities, expects the Federal Reserve to initiate a new round of rate hikes this year, with a total increase of 75 basis points, potentially beginning as early as September.
The report notes that, amid increasing persistence and breadth of inflation, multiple factors are intensifying price pressures, including loose financial conditions, supply chain disruptions, a recovering labor market, and a surge in investment related to artificial intelligence. Even though recent de-escalation in the Middle East has led to a decline in oil prices, prior conflicts have caused inflation expectations to become "structurally entrenched."
Fleet expects that the new Federal Reserve Chair, Kevin Warsh, will signal a hawkish stance at his first FOMC meeting, potentially reversing market expectations for a September rate cut. He also predicts that September, December, and early 2027 could all serve as potential windows for rate hikes.
On the policy path, Citadel Securities believes that this June FOMC meeting may remove language indicating a dovish bias and reinforce tightening signals through an updated dot plot, with several officials expected to raise their inflation forecasts above 3% while lowering their unemployment rate projections.
Based on the Taylor Rule calculation, the institution believes the optimal policy path for the current economic conditions is a cumulative interest rate hike of 75 basis points this year, with a potential policy shift signal as early as July to pave the way for future rate increases.
Additionally, a recent survey by Duke University shows that most former Federal Reserve officials believe the Fed may need to raise rates again this year due to energy shocks and persistent high inflation, although some respondents also noted that the economy could weaken over the summer.