'Fed whisperer': Fed is poised to hike rates next week, but a single hike won't solve the problem.

BlockBeats news, September 12 - "Fed whisperer" Nick Timiraos wrote in his latest article that investors have largely concluded the Fed will raise rates next week for the first time in three years, but the harder question is what happens after that. Since almost no one within the Fed believes a single 25 basis point rate hike is enough to bring down inflation, if a rate hike is decided next week, it would reflect a judgment that rates were previously at the wrong level, and one rate hike cannot solve the problem.

Since the 1990s, the Fed has only raised rates on a "one-off" basis once. Warsh said in July that he did not think the Fed was good at "fine-tuning," and analysts say a chairman skeptical of fine-tuning is unlikely to raise rates by 25 basis points and then declare the job done. Warsh said last month that there is not much evidence that borrowing conditions are restraining economic activity. If rate hikes are pushed on this basis, the market will naturally ask how high rates need to go.

Without an explanation, the market may interpret one rate hike as the beginning of a larger-scale action. Therefore, this week investors no longer view the September meeting as a single-meeting issue. The market currently expects at least three cumulative rate hikes by next June, up from the previous expectation of two.