How much will the Fed raise rates in the next meeting?

Inflation came in higher than expected at 9.1% — compared to economists’ 8.8% forecast — the highest in over 40 years.

What’s the big deal? For decades, the U.S. has been dealing with low inflation — trying to find ways to bring it higher.

Remember, too little inflation and too much inflation is bad — it needs to be the right amount (2% as deemed by the Fed).

In response, markets fell after the data but recovered the majority of their losses by the end of the day.

For investors, one of the biggest questions is: how will the Fed increase interest rates given the new data?

• After the inflation report, the odds of the Fed raising rates by 1% in their next meeting increased to 56% (CME FedWatch).
• The odds of a 1% raise were near 0% a week ago.

The Fed raised rates by 0.75% in their last meeting. Now, that might seem like a chump raise compared to what’s ahead.

Canada — “hold my beer” — proceeded to raise interest rates by one full percentage point yesterday.

Brace yourselves: Hedge fund trader Gang Hu has watched inflation-related assets for the past 20 years. He’s been right this year, and here’s what he’s predicting:

• Inflation will be above 8% each month for the next three months.
• Inflation will peak in September or October — when things will finally start turning around.

Barclays’ head of inflation trading sees supply chain issues easing — but thinks inflation will be “stickier than most people imagine.”

Until we see inflation ease, markets are in for a rough ride.