CPI hot & Interest rates

there is a possibility to have one more hike

Raising again is not the consensus, but it is definitely a possibility if inflation doesn’t stay controlled, and some people are talking about it

Hope so. But it’s not just the current month. There was hope early in the year that we had almost hit the goal and would hit it and be ready to start cutting soon. Since then there have been a series of slightly above expectations readings and a small regression from the goal. Believing we don’t need more rate increases in the future means you either believe that that small several month regression is temporary and will resolve itself or means that you believe the Fed will cave and accept 3% instead of 2% inflation long term.

While it is true there have been several months of slightly disappointing inflation, I don’t think it means we are stuck here and are required to either raise rates accept a slightly higher inflation. When the Fed increased its rate to around 5.5%, there is always a significant lag between the policy and economic impact, and the impact grows more and more over time. Each month, with the higher interest rates, businesses aren’t making the expansion they might have made with a lower interest rate, and month by month, there is a cumulative effect of the higher interest rates weighing on the economy. Just keeping the rate where it’s at for another few months will have a substantial, growing impact. I’m not saying they can start cutting for sure in September — Putin will probably cut oil production this summer to try to sabotage the US economy and influence the elections, but overall, factoring in all we know so far, the market now believes the Fed will start interest rate cuts this September. Until then, maybe there will be negative surprises (war, climate disasters) but there can be positive surprises (prices getting under control, peace treaties, technological innovations).