JP M were at 50bp but revised that to 75bp moments ago. JPM cite "two devlopments":
- First, the startling rise in the longer-term inflation expectations in the University of Michigan's consumer sentiment survey could imply a higher level of the nominal neutral interest rate.
- Second, according to the WSJ this afternoon, the Committee will not go into tomorrow's two-day meeting constrained by their previous guidance that a 50bp meeting "would likely be appropriate.
JPM go on, not ruling out a 1% rate hike:
- To the extent today's report about Fed officials considering "surprising markets with a larger-than- expected 0.75pp interest rate increase"helps reinforce expectations for such a move, one might wonder whether the true surprise would actually be hiking 100bp, something we think is a non- trivial risk.
- After this week we look for two more 50bp hikes in July and September before the Committee slows to a 25bp hike per-meeting pace until reaching terminal funds at 3.25-3.50% early next year.