BofA’s Bhave Says October Fed Rate Hike Remains Possible
The BofA economist’s call challenges futures pricing that strongly favors a pause after the Fed’s September increase, despite renewed inflation pressure.
The Lead
BofA Securities senior U.S. economist Aditya Bhave said the Federal Reserve could raise interest rates at its October 27-28 meeting, posing a risk for borrowers and investors even as futures pricing strongly favors no change.
Key Facts
- The Fed raised its target range by 25 basis points to 3.75%-4.00% on September 16. (federalreserve.gov)
- September consumer prices rose 0.6% from August and 3.7% from a year earlier. Core inflation was 2.6%. (bls.gov)
- Most Fed participants judged another increase would probably be appropriate by year-end, without specifying October. (federalreserve.gov)
Article Body
Bhave’s assessment, delivered on Bloomberg Surveillance, puts the timing of further tightening at the center of the debate. The Fed unanimously increased rates in September, and minutes from that meeting said most participants expected another increase would probably be appropriate before year-end. Officials stressed that each decision would depend on incoming information. (federalreserve.gov)
The inflation backdrop has strengthened the case for keeping an October move available. Headline consumer inflation accelerated to 3.7% in September, driven partly by a 9.1% monthly rise in gasoline prices, while core inflation increased to 2.6%. (bls.gov)
Chair Kevin Warsh declined on October 16 to prejudge either the October or December meeting, offering no fresh timing signal. (apnews.com) A quarter-point October increase would lift the target range to 4.00%-4.25%. Will policymakers act immediately, or wait until December for more evidence?
What to Watch
The clearest signal is futures positioning: a tracker using October 20 closing prices assigned an 84% probability to a hold and 16% to a quarter-point increase. A sharp repricing would show Bhave’s scenario gaining traction. (sessionopen.com)