The move could strengthen Fed Chair Kevin Warsh’s credibility in tackling inflationary pressures: Citadel Securities
Analysts at Citadel Securities expect the US Federal Reserve to raise interest rates at its meeting this week, in a surprise move that could strengthen Fed Chair Kevin Warsh’s credibility in tackling inflationary pressures. 
Frank Flight, the firm’s head of macro strategy, said a 0.25% rate hike next Wednesday would reaffirm Warsh’s commitment to bringing inflation back to the Fed’s 2% target, while signaling that policymakers are moving away from the practice of providing advance guidance on every policy move.
In a note, Flight said markets may be underestimating the Fed’s shift toward a more hawkish stance, arguing that a rate hike this week would effectively mark the end of the era of “forward guidance” and underscore the independence of the US central bank.
He believes a move this week would have a greater impact than waiting until September, as markets expect, by reshaping investors’ expectations for how the Fed will respond to inflation.
Flight added that such a surprise move could also influence companies’ pricing decisions and workers’ wage demands before inflationary pressures become more entrenched, potentially reducing the need for further monetary tightening later.
The move could strengthen Fed Chair Kevin Warsh’s credibility in tackling inflationary pressures: Citadel Securities
Analysts at Citadel Securities expect the US Federal Reserve to raise interest rates at its meeting this week, in a surprise move that could strengthen Fed Chair Kevin Warsh’s credibility in tackling inflationary pressures.
Frank Flight, the firm’s head of macro strategy, said a 0.25% rate hike next Wednesday would reaffirm Warsh’s commitment to bringing inflation back to the Fed’s 2% target, while signaling that policymakers are moving away from the practice of providing advance guidance on every policy move.
In a note, Flight said markets may be underestimating the Fed’s shift toward a more hawkish stance, arguing that a rate hike this week would effectively mark the end of the era of “forward guidance” and underscore the independence of the US central bank.
He believes a move this week would have a greater impact than waiting until September, as markets expect, by reshaping investors’ expectations for how the Fed will respond to inflation.
Flight added that such a surprise move could also influence companies’ pricing decisions and workers’ wage demands before inflationary pressures become more entrenched, potentially reducing the need for further monetary tightening later.
