WSJ Timiraos on CNBC:

  • 25 basis point hike because skipping hike risks a market melt up
  • the case for a pause boils down to concerns that credit events can turn serious and it's better to move slowly
  • The Fed decision likely to be dependent on market response in coming days
  • Everything we heard from the Fed is we have the tools to solve financial stability problems so we can keep our eyes on the prize of restoring price stability.

Yesterday, the ECB's Lagarde expressed a similar view that there are tools to solve financial stability, but inflation is their mandate.

We have to be cognizant that the Fed and the ECB talk. The ECB raised by 50 basis points, but you can argue that the ECB is behind the curve relative to the Fed. I would think that this is indeed likely to support 25 basis points.

The chance for a 25 basis point hike is the odds on favorite at 71%, but what is vulnerable is the projection of rates down the road. The markets are pricing in a rate in January 2024 is at 3.95% with a terminal rate of 4.83%. That implies one more hike to 4.75% to 5%, and then a move down to 3.75% to 4% by the end of January (or down 1 bps). I am not thinking that is a stretch.