Economists at Barclays and Jefferies LLC expect the US Federal Reserve to raise interest rates by 75 basis points at the current June meeting, while traders expect 50% of the Fed to implement this move at its July meeting. .
Inflation data released on Friday, which exceeded expectations, led to an increase in the yields of treasury bills to reach their highest levels in several years, and also caused a flattening or reversal of the yield curve of the various maturities of US treasury bonds.
The yield on the 5-year bond rose to its highest level in more than a decade, surpassing its 30-year counterparts for the first time in a month, which gives an indication to some investors that the monetary tightening of the central bank may lead to an economic recession, according to Bloomberg Agency.
Barclays economists led by Jonathan Millar stated in a research note: “The Fed now has good reason to surprise the markets and raise rates more aggressively than expected in June. We understand that may be soon, and potentially in June or July. Our expectations are for a 75 basis point rate hike on June 15.”
The increase in interest rate expectations follows the announcement of the “Labour Department” report that revealed the acceleration of the rise in the consumer price index to its highest level in 40 years, despite the skepticism of Federal Reserve watchers that President Jerome Powell took such a step.
Jefferies economists Anita Markowska and Thomas Simmons said in a research note that Friday’s inflation data is “a game-changer that will force the Federal Reserve to accelerate the pace of monetary tightening.”