That may also include interest-rate hikes.<\/strong><\/p>\n Yes, the narrative around U.S. monetary policy has completely inverted. With May Headline PCE climbing to 4.1% and core PCE hitting 3.4%, economists are no longer asking \u201c\u2018When the Fed will cut\u201d but rather \u201cHow soon it will hike?\u201d<\/strong><\/p>\n Federal Reserve Bank of Minneapolis President Neel Kashkari, a voting member of the FOMC, said June 26 that signs of widespread inflation led him to pencil in one interest-rate increase for this year<\/strong> in the Fed’s June 16-17 economic projections or \u201cdot plot.\u201d\u00a0<\/p>\n \u201cI\u2019m concerned about inflation,<\/strong> and it\u2019s not only tied to what\u2019s happening in the Middle East, it\u2019s just the impression of broader inflationary pressures in the economy,\u201d Kashkari said in an interview with Bloomberg News.<\/p>\n The widely-watched CME Group FedWatch Tool showed expectations for a renewed tightening focused on the possibility of interest-rate hikes surged dramatically over the last week.<\/p>\n As I reported, big banks including Bank of America and Goldman Sachs aggressively shifted their forecasts, removing all previously expected rate cuts for the remainder of the year. BofA explicitly called for multiple hikes to \u201cbring down the hammer\u201d on sticky services and tariff-induced goods inflation.<\/p>\n \u201cIn his press conference last week, Fed Chair Kevin Warshacknowledged that inflation has exceeded the FOMC’s target for more than five years and committed the Fed to restoring price stability. Accordingly, we remain inclined to expect at least one rate hike before year-end, with July a live possibility<\/strong>,\u2019\u2019 according to a note by Yadreni Research emailed to TheStreet.\u00a0<\/p>\n FRED Economic Data/TheStreet<\/p>\n<\/figcaption><\/figure>\n Most credit cards carry variable Annual Percentage Rates (APRS) tied directly to the Fed\u2019s prime rate. If the Fed hikes rates by 25 or 50 basis points later this year, borrowing costs will climb almost immediately<\/strong> and increase the cost of carrying a balance.<\/p>\n Fixed-rate mortgages track long-term Treasury yields rather than the Federal Funds Rate but mortgage rates will still face renewed upward pressure.<\/strong> Prospective homebuyers and sellers can expect mortgage rates to remain sticky or edge higher, further squeezing housing affordability.<\/p>\n As far as auto loans and personal credit<\/strong>, financing a new or used vehicle will become more expensive and potentially cool consumer demand for big-ticket items.<\/p>\n There is a silver lining for consumers.<\/strong> Yields on High-Yield Savings Accounts (HYSAs), Certificates of Deposit (CDs), and money-market funds will remain elevated or tick higher, rewarding cash savers with strong risk-free returns.<\/p>\n For stocks, <\/strong>higher rates increase the discount rate used to value future cash flows which typically pressures equity valuations especially high growth tech and speculative stocks. Companies with heavy debt loads will also face steeper refinancing costs<\/strong> potentially crimping corporate earnings.<\/p>\n With bonds, <\/strong>as a fundamental rule, bond prices move inversely to yields. So a hawkish pivot means yields on the two-year and 10-year Treasury will push higher causing capital losses on existing lower-yielding bonds<\/strong> in your portfolio. However, it also opens up opportunities to lock in higher income on new debt purchases.<\/p>\n The sudden transition from anticipating rate cuts to preparing for rate cuts creates a regime shift. Investors can expect heightened volatility<\/strong>as Wall Street rapidly reprices classes to adjust to a \u201chigher-for-even-longer\u2019\u2019 interest-rates reality.<\/p>\n The FOMC voted 12-0 June 17 to hold the benchmark Federal Funds Rate steady at 3.50% to 3.75%.<\/strong><\/p>\n \u201cThey\u2019re playing for time,\u201d said Jonathan Hill, head of inflation research strategy at Barclays told The New York Times. \u201cInflation expectations are tame because the market is anticipating the Fed to hike if needed.\u201d<\/p>\n Policymakers had cut rates by 25 basis points at its last three meetings of 2025 to shore up the softening labor market.\u00a0<\/p>\n Related: BofA flips the script with bombshell Fed interest-rate outlook<\/strong><\/p>\n These \u201cinsurance\u201d cuts stopped after the majority of policymakers decided the risk from higher prices was outweighing signs that the jobs market was stabilizing.<\/p>\n The funds rate is the interest rate at which banks lend balances at the Federal Reserve to other banks overnight. It triggers the cost of short-term borrowing across the U.S. economy.<\/p>\n The Fed\u2019s dual mandate<\/strong> from Congress requires maximum employment and stable prices.<\/p>\n \u201cHow do we get inflation back down in a reasonable period of time without doing a lot of damage to the labor market<\/strong>?\u201d Kashkari said. \u201cThat\u2019s the challenge that we\u2019re wrestling with.\u201d\u00a0<\/p>\n Inflation expected to continue to rise through the end of the year<\/strong><\/p>\n The May Personal Consumption Expenditures, the Fed\u2019s current preferred inflation gauge, marked the highest annual print since early 2023 <\/strong>when it showed Headline PCE (Year-over-Year) at 4.1%, up from 3.8% in April.<\/p>\n The biggest jump came in May\u2019s consumer spending or nominal PCE at 0.7%<\/strong> at $156.1 billion. Adjusted for inflation, Real PCE rose by 0.3%<\/p>\n The Cleveland Fed had modeled year-over-year headline PCE at 3.97%, up from April\u2019s 3.8%.<\/p>\n According to a new Bloomberg poll released June 26, economists raised their forecasts for Core PCE excluding food and energy to rise 3.2% <\/strong>in the fourth quarter from a year earlier. Estimates for overall inflation were little changed at 3.5%.\u00a0<\/p>\n The poll also boosted estimates for job creation, scrapping the chance of a Federal Reserve interest-rate cut until well into 2027.<\/strong><\/p>\n \u201cThis is a healthy consumer, but the broader macro is giving them a bit of hesitation,\u201d Lowe\u2019s Chief Executive Officer Marvin Ellison said, according to Bloomberg.<\/p>\n Related: Goldman hints at Fed\u2019s next interest-rate bet under Warsh<\/strong><\/p>\n #Inflation #flips #Wall #Street039s #Fed #interestrate #bets<\/p>\n","protected":false},"excerpt":{"rendered":" Remember how this was supposed to be the Hot Rate-Cut Summer? Sigh. Despite falling gas prices, economists and Fed watchers remain concerned that stubborn sticky inflation driven by rising service… <\/p>\n","protected":false},"author":1,"featured_media":7531,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[246],"tags":[4076,674,10704,176,11450,8249,1152],"class_list":["post-9448","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-popular","tag-bets","tag-fed","tag-flips","tag-inflation","tag-interestrate","tag-street039s","tag-wall"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/9448","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9448"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/9448\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/7531"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9448"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9448"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9448"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The CME FedWatch Tool shows significant rate hike shift<\/strong><\/h3>\n
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![](\"https:\/\/www.thestreet.com\/.image\/NDA6MDAwMDAwMDAzMDcwNjYw\/photo-3070660.jpg?profile=rss\")
How an interest-rate hike will impact consumers<\/strong><\/h3>\n
How a possible interest-rate hike will impact investors<\/strong><\/h3>\n
Fed keeps rates steady so far this year<\/strong><\/h2>\n
Fed\u2019s dual mandate requires a tricky dance<\/strong><\/h2>\n
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Poll: Economists raise inflation forecasts for rest of the year<\/h2>\n