The Fed’s larger 75bp rate hike came as little surprise to the markets following the worse than expected May CPI data and Monday’s tip-off in the Wall Street Journal. Our view that inflation will remain uncomfortably high and that the economy will avoid a recession means we expect the Fed to follow through on plans to continue tightening rapidly, with rates peaking at the upper end of the 3.5%-4.0% range officials now expect early next year.
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