Castle Securities: Fed Chair Powell May Surprise With Rate Hike This Week to Bolster Anti-Inflation Credibility

July 28th, according to Wall Street News, Citadel Securities expects the Federal Reserve to raise interest rates at this week's meeting—a surprising move that would boost the credibility of Federal Reserve Chairman Kevin Walsh in combating inflation. In a report, the company's Head of Macro Strategy, Frank Flight, wrote that if the Federal Reserve announces a 25 basis point rate hike on Wednesday, it would reinforce Walsh's repeated commitment to restoring price stability and also indicate that policymakers are no longer relying on pre-communicating policy signals to the market. Flight stated: "The market may once again be underestimating the extent of the Fed's hawkish pivot. A rate hike this week 'will clearly end the era of forward guidance' and highlight the Fed's independence." Flight believes that a rate hike this week would have a greater impact than waiting until September to act, as it would change market expectations about how the Federal Reserve is addressing inflation.