Scenario 5 of 5 · Powell, June 2022
Inflation just printed 8.6%. The labor market is tight. Pace of hikes?
Headline CPI just printed 8.6% — the highest reading since 1981. Energy and shelter are leading; core inflation has broadened. Wage growth is running near 6%.
The Fed began hiking in March 2022, taking the target range from near zero to 0.75–1.00% in two meetings. The June meeting is here: market pricing implies a 75bp move, the largest single-meeting hike since 1994.
But housing is already wobbling, and the post-COVID supply chain is starting to unkink. A 75bp move risks tipping the economy; a 50bp move risks losing the inflation-fighting credibility you have spent three months building.
CPI YoY8.6%
Unemployment3.6%
Mfg PMI56.1
Services PMI55.9ISM Services release, 3 June 2022 (May data). Both sectors were still expanding; the goods/services divergence that defined this episode opened up over the rest of 2022, as manufacturing slid toward contraction while services held up.
Fed Funds1.00%
10-yr Yield3.40%
GDP YoY4.0%
Data through May 2022 — anything beyond this date is hidden until you decide.