Wrightson ICAP: 75bp Hike In July

Wrightson ICAP is looking for a 50bp Fed hike this week, but they're now looking for a 75bp hike in July followed by 50bp in September (after which a return to a 25bp hiking pace "might be possible", dependent on data).

• "The burden of proof" on inflation shifted after Friday's CPI data, and some favorable surprises would be necessary to justify not moving 75bp in July.
• Why not 75bp in June? "On paper, that would not be an unreasonable response to Friday’s data, which underscored the need to move away from the Fed’s easy-money policy stance “expeditiously”. However, a 75-basis-point move would be the largest rate hike in nearly 30 years and could lead to unexpected disruptions. Cementing investor expectations of a steeper rate trajectory would tighten financial conditions quite effectively in the short run without running the implementation risks associated with a last-minute deviation from existing guidance. The Fed seems more likely to lay the groundwork for the possibility of a 75 bp move next month than to announce one after this week’s meeting."