Fed to hike interest rates by 75 basis points

Fed Chairman Jerome Powell signaled yesterday that the Fed could hike interest rates by 75 basis points at the Federal Open Market Committee meeting on September 20-21. Powell said, “We need to take immediate, direct and strong action, as we are doing now. My colleagues and I are firmly committed to that goal.” Bank of America Corp., Barclays Plc and Jefferies LLC strategists raised their September interest rate hike estimates from 50 basis points to 75 basis points following these statements. A similar step came from Goldman Sachs the day before. Swap traders have also begun pricing in a four-in-five probability of a 75 basis point rate hike this month. Chicago Fed Chairman Charles Evans also said yesterday, “I think we have a good plan. We could very well hike 75 basis points in September. I haven’t made my final decision yet. But I know we need to raise interest rates significantly higher than where they are right now.” Meanwhile, mortgage rates in the U.S. rose to their highest level since 2008, signaling a deeper slowdown in the housing market. The average interest rate on a 30-year home loan rose to 5.89% from 5.66% last week, according to Freddie Mac.