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How will the US Fed deal with high inflation?
15 Jun 2022 (441 views)  

My friend is active in investing in the global stock market. 
He asked for my view about the expected hike in interest rate by the US Fed.
A few weeks ago, the market was expecting an increase of 0.5% each month for a few months. 
Recently, the market was now talking about a 0.75% or 1% increase in the interest rate. 
If the Fed is more aggressive, it will cause the stock market to collapse.

I personally believe that the Fed will stay with the earlier expectation of an increase of 0.5% at each monthly meeting. 
I do not think that the Fed will increase it to 0.75% or 1% as expected by some analysts.
If the Fed maintains the increase at 0.5%, the stock market might rally.

Why do I hold the view that the Fed will not be more aggressive in raising interest rate?

Here are my reasons:

a) The high inflation is caused mainly by supply chain disruptions.
b) A more aggressive hike in interest rate will not help to reduce the inflation rate. Instead, it will lead to a severe recession.

I hope that my prediction is correct. 

Tan Kin Lian
 


How will the US Fed deal with high inflation?
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My friend is active in investing in the global stock market. 
He asked for my view about the expected hike in interest rate by the US Fed.
A few weeks ago, the market was expecting an increase of 0.5% each month for a few months. 
Recently, the market was now talking about a 0.75% or 1% increase in the interest rate. 
If the Fed is more aggressive, it will cause the stock market to collapse.

I personally believe that the Fed will stay with the earlier expectation of an increase of 0.5% at each monthly meeting. 
I do not think that the Fed will increase it to 0.75% or 1% as expected by some analysts.
If the Fed maintains the increase at 0.5%, the stock market might rally.

Why do I hold the view that the Fed will not be more aggressive in raising interest rate?

Here are my reasons:

a) The high inflation is caused mainly by supply chain disruptions.
b) A more aggressive hike in interest rate will not help to reduce the inflation rate. Instead, it will lead to a severe recession.

I hope that my prediction is correct. 

Tan Kin Lian