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Robert Burgess

The Case Against a Mega 1% Federal Reserve Rate Increase

A 100-basis-point jump would send the wrong message and possibly be counterproductive.

Don’t overreact.

Don’t overreact.

Photographer: Ting Shen/Bloomberg 

If the consumer price index report for August that showed inflation remains much hotter than forecast was not enough of a shocker, then talk that the Federal Reserve needs to raise interest rates in even bigger chunks starting with its meeting next week surely is.

The idea that the central bank must lift its target for the overnight rate between banks by 100 basis points — something it hasn’t done since the 1980s — after increasing it by 75 basis points in both June and July is not some fringe notion. Money market traders are pricing in a not insignificant 33% chance that it will happen. The thinking is that the Fed needs to get radical if it truly wants to get control of inflation, which rose 8.3% in August from a year earlier.