Experts weigh in: What should the Fed do about rates?

Jerome Powell
  • If the Fed raises rates too little, inflation could get out of control, and if it raises them too much, it would deal a severe blow to the local economy.
  • Some economists now expect that the Fed will not be able to achieve a “soft landing” due to the latest inflation data.
  • Next week the Federal Reserve will raise interest rates and, while some believe that they will increase by 75 points, others do not rule out that the increase will be 100 basis points.

Next week will be key for the future of stocks. The Federal Reserve will raise rates and investors are wondering how high they will go.

It is that if the Fed raises interest rates too little, inflation could get out of control and, if it raises them too much, it would raise the risk of a prolonged recession.

“ The Federal Reserve will overdo it. In my opinion, they are already overdoing it. There is no question that we are going to have a hard landing,” said Joseph LaVorgna, chief economist at SMBC Group and a former senior economic adviser in the Trump administration.

LaVorgna compared this situation with 1994, when the Fed also raised rates quickly and abruptly, although the expert clarified that today the economy is not as strong as it was then.

If the Fed continues like this, they are going to have a serious recession and people will lose their jobs”, opined the CEO of Starwood Capital Group, Barry Sternlicht.

Sternlicht believes that Jerome Powell is failing to beat inflation and is only showing signs of slowing down due to lower gasoline prices.

“We think it is becoming clear that a more aggressive path of interest rate increases will be needed to combat entrenched inflation stemming from an overheated labor market, unsustainably strong wage growth and higher inflation expectations.”

Nomura economist Rob Dent.

Finally, Tom Porcelli, Chief US Economist at RBC Capital Markets, believes the Fed’s inflationary focus is overdone and encouraged more cautious action.

“Here we are again with Powell focused on another lagging indicator (inflation) and ready to make another mistake, this time adjusting too far and ushering in a more significant slowdown in growth than we need.”


As of Thursday morning, the market believes there is a 20% chance of seeing a 100 basis point increase while on Wednesday the chances were 34%. However, the vast majority estimate that the increase will again be 75 points.