“Price data released on Friday, unprecedented in the past 40 years, raises the likelihood of a 75 basis point hike, rather than the widely expected 50 basis point, as inflation is likely to remain stubbornly high in the coming months and rapid price increases are not limited to energy but are widespread. Another 50 or 75 bp increase is almost certain for July as well “, comments Paolo Zanghieri, senior economist at Generali Investments, aligning himself with market expectations.
“Yet, the Fed’s determination to act quickly and decisively on rates will have to take into account the fact that cracks are starting to appear in the sectors of the economy that are more sensitive to rates, such as construction. manufacturing sector, indicate a substantial deceleration of activity in the wake of uncertainty, rising input prices and weakening world demand – explains the economist -. This puts the Fed an even more difficult compromise between fighting the inflation and avoid pushing the economy into recession “. Generali Investments believes this will lead to a slower pace of tightening starting in September, when we expect a 25bp rate hike, and for the rest of the year.