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The Fed may be on the verge of a serious mistake, prominent economists warn

Prominent economists warn that the Federal Reserve may commit a serious mistake if it raises interest rates this week. Mark Zandi of Moody's argues that a hike would increase pressure on consumers already facing high inflation and rising energy costs. While Wall Street expects a quarter-point increase, some analysts suggest rate hikes cannot cure supply-driven inflation. Conversely, JPMorgan reports the probability of no rate hike is extremely low, and other analysts maintain that a single hike should not derail the economy.

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  • βœ“ Prominent economists warn that the Federal Reserve may commit a serious mistake if it raises interest rates this week.
  • βœ“ Mark Zandi of Moody's argues that a hike would increase pressure on consumers already facing high inflation and rising energy costs.
  • βœ“ While Wall Street expects a quarter-point increase, some analysts suggest rate hikes cannot cure supply-driven inflation.
πŸ›‘οΈ Source Corroboration: 10 independent reporting domains (70% confidence) ⏱ Read time: ~2 min

What changed

Mark Zandi of Moody's explicitly warned that hiking rates amid rising energy costs would be a serious mistake.

Live updates

  1. Economists warn Federal Reserve of serious mistake regarding rate hikes

    Prominent economists warn that the Federal Reserve may commit a serious mistake if it raises interest rates this week. Mark Zandi of Moody's argues that a hike would increase pressure on consumers already facing high inflation and rising energy costs. While Wall Street expects a quarter-point increase, some analysts suggest rate hikes cannot cure supply-driven inflation. Conversely, JPMorgan reports the probability of no rate hike is extremely low, and other analysts maintain that a single hike should not derail the economy.

    Why it matters

    The Federal Reserve is deciding whether to raise rates to combat inflation. This decision is contentious because rate hikes target demand, but critics argue current inflation is driven by supply issues like oil availability.

    Still unconfirmed

    • Wall Street expects a quarter-point interest rate increase.
    • JPMorgan analysis indicates the probability of no rate hike is extremely low.
    • Rosenberg believes five rate hikes would be a mistake, whereas one would not.
    • A September rate hike is described as a fool's errand by Seeking Alpha.

    What to watch next

    • The Federal Reserve's official interest rate decision this week.
    • New data on energy costs and supply-driven inflation.
    Sources used for this update (10)
    1. MarketWatch β€” The Fed may be on the verge of a serious mistake, prominent economists warn
    2. Forbes β€” The Federal Reserve Must Not Hike Rates This Week
    3. Crux Investor β€” Deficits, Debt, and the Dollar: Why Rate Hikes Won’t Cure Supply-Driven Inflation
    4. Herald/Review Media β€” Everyday Economics: The Fed can’t pump more oil
    5. ε―Œι€”η‰›η‰› β€” Probability of No Rate Hike Is Extremely Low! JPMorgan: An Analysis of Five Scenarios for the Fed’s Decision
    6. KITCO β€” Rosenberg says one Fed hike isn't the mistake, five would be
    7. Yahoo Finance β€” Moody's Mark Zandi warns of a 'serious' mistake if the Fed hikes rates as Wall Street expects a quarter-point increase
    8. TradingView β€” A rate hike shouldn't derail the market or the economy
    9. Seeking Alpha β€” Fed Talk: A September Rate Hike Would Be A Fool’s Errand (NYSEARCA:DIA)
    10. www.businessinsider.com β€” A top economist says pressure is mounting for consumers, and the Fed may be about to make a 'serious' mistake
    confidence 70%
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