Citadel Securities Sees Warsh Delivering Surprise Fed Rate Hike

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Or sign-in if you have an account.edw]pqwp[7tj8611s1gs{zms_media_dl_1.png Bloomberg(Bloomberg) — Citadel Securities expects the Federal Reserve to raise interest rates this week — a surprise move strengthening Chairman Kevin Warsh’s credibility in the battle with inflation.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountA quarter-point increase on Wednesday would reinforce Warsh’s repeated pledge to restore price stability while showing policymakers no longer rely on signaling every policy move well in advance, Frank Flight, the firm’s head of macro strategy, wrote in a note.“The market may once again be underestimating the extent of the hawkish shift at the Fed,” Flight said. A hike this week “would emphatically end the forward guidance era” while underscoring the Fed’s independence, he said.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterest-rate swaps imply about a 40% chance of a quarter-point increase on Wednesday, an unusually high degree of uncertainty so close to a Fed decision by the standards of recent years. Traders are fully pricing in a rate hike by September.A move this week would have a greater impact than waiting until September because it would reshape expectations about how the Fed responds to inflation, according to Flight. In addition to supporting the central bank’s inflation-fighting credibility, a surprise increase would influence businesses’ pricing decisions and workers’ wage demands before inflation becomes more entrenched, potentially reducing the amount of tightening needed later, he said.While the recent softer payroll and inflation data initially reduced the perceived likelihood of a July move, Flight argued those reports should not outweigh broader evidence that inflation risks remain elevated and the labor market is stable.Meanwhile, the geopolitical backdrop in the Middle East remains volatile, with oil prices sinking on Monday as the US paused daily strikes against Iran. Despite the recent easing in tensions, prices are still up about 20% this month as the Iran-backed Houthis threaten Saudi exports from the Red Sea. The energy price increases in recent weeks may tip the balance toward a hike, he added.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.