Fed could weigh historic 100 basis-point hike after inflation scorcher

Federal Reserve officials may debate a historic one percentage-point rate hike later this month after another searing inflation report, which cemented odds on a 75 basis-point move and was seen keeping the same again on the table for September.

Investors upped bets the central bank could raise rates by 100 basis points at its July 26-27 meeting – which would be the largest increase of the modern Fed era – with futures pricing a one-in-three chance after consumer prices rose a hotter-than-forecast 9.1% in the year through June.

“I think they have time, if they want, to change that expectation to 100. I don’t think they’ve given us a great reason why they should be going slow here, or being gradual,” said Michael Feroli, chief U.S. economist at JP Morgan Chase.

“If you do in fact get 100 in July and 75 in September, then I think the growth outlook for later in the year probably deteriorates. Right now, I’m inclined to think that the main impact might be to motivate more front loading by the Fed,” he said.

Fed Chair Jerome Powell told reporters last month after the central bank raised rates by 75 basis points that either a 50 or 75 basis-point increase was likely in July.

A majority of his colleagues since then have either echoed his line or endorsed the bigger move.

Fed Governor Christopher Waller is scheduled to speak on Thursday.

Atlanta Fed President Raphael Bostic and his St. Louis colleague James Bullard both have events on Friday. After that they enter their premeeting blackout period.

Central banks globally are confronting unprecedented inflation. The Bank of Canada on Wednesday increased rates by a surprise full percentage point .