Fed seen raising rates higher in wake of ‘ugly’ August consumer inflation data

More Wall Street economists now see the Federal Reserve moving interest rates higher than they previously expected in the wake of the “ugly” August consumer price inflation data. Economists at TD Securities said they now expect the Fed to raise its benchmark rate by 75 basis points next week and in November, followed by a 50 basis point move in December. This means a higher terminal rate range of 4.25%-4.5% by the end of the year. Economists-at Goldman Sachs have raised their forecast for the Fed’s December meeting to 50 basis points from 25 basis points previously. The firm now expects a 75 basis point move next week followed by two 50 basis point moves by year-end, which would take the Fed’s policy rate to a range of 4%-4.25%. “The August CPI report is an ugly one for the Fed,” said Krishna Guha, vice chairman of Evercore ISI. He said his firm was sticking with the forecast of a 75 basis point hike in September followed by 50 basis points in November and 25 basis points in December.