Fed Jumps to 75 bps After Hot CPI
What Happened
On June 15 the FOMC delivered a 75 bps hike to 1.50–1.75%, abandoning prior guidance for 50 bps after May CPI came in at 8.6% year over year. The new dot plot pointed to a year-end rate near 3.4% and 2023 around 3.8%.
What It Means
Policy credibility took precedence over gradualism. Markets priced a faster sprint toward neutral, equities sold off, and the two-year Treasury yield briefly topped 3.4%. The move underscored how inflation data now dominates communication strategy.
What I Think
The Fed chose to catch up in one leap. The cost is higher recession odds: the curve flattened hard, hinting at growth fears. I’m looking for signs of demand cooling in housing and credit before assuming this pace can slow.
Market Terms
- Supersized 75 bp catch-up – The Fed’s leap after the hot May CPI print.
- Dot-plot jump to 3.4% – Year-end rate projections reset sharply higher.
- Sprint toward neutral – Markets pricing a faster path to regain policy credibility.
- Curve-flattening recession tell – Growth fears showing up as long yields lag.
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