Fed Mulls ‘Game Changer’ to Jolt Inflation: Decision Day Guide

Federal Reserve Chair Jerome Powell, who’s carefully telegraphed interest rate hikes over four years, looks likely to abandon gradualism and move more forcefully to stamp out inflation along with growing concerns that it will persist.

The Federal Open Market Committee is expected to raise rates 75 basis points by Wall Street firms including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Plc, who cite rising inflation expectations among Americans in looking for the largest increase in nearly three decades. Citigroup Inc. and Bank of America Corp. economists are among those who still think the Fed will shift by 50 basis points as previously planned.

The Fed will announce a decision and publish fresh forecasts at 2 p.m. Wednesday in Washington. Powell will hold a press conference 30 minutes later.

“The usual rule is, if you are worried about how your moves are going to affect financial markets, you move gingerly,” said Barclays senior economist Jonathan Millar, among the first to call for 75 basis points. “You worry about the risk of breaking something. In this case, it’s worth breaking something. We are at a very critical point where it looks like their credibility is starting to erode.”

Powell last month said the Fed wasn’t actively considering a 75 basis-point move, while not ruling it out if conditions changed. While the Fed chief laid out a baseline of 50 basis-point increases in June and July, he also hedged by saying that hinged on the economy evolving as officials expected.