The Fed Will Hike Again Next Week And It Won't Help Inflation

By Vincent Cignarella, Bloomberg Markets Live commentator and analyst

The Fed is scheduled once again to hike interest rates by 50 bps next Wednesday in an attempt to stem rising inflation. But with inflation a result of commodity prices and not the demand for money, the Fed’s efforts will fall short.

That’s likely to keep pressure on equity markets.

Inflation began to surge with the jump in commodity prices in early 2021, a full year after the massive fiscal stimulus package was announced and the beginning of the supply bottlenecks that many believe are the real cause of inflation.

The cost of money will have to rise considerably higher for the Fed to address a problem that isn’t really a monetary policy issue, but one that is partly fiscal in nature and partly driven by supply and demand imbalances.

There will still be pressure on risk assets, namely stocks, until supply and demand balance returns to the economy, easing inflation and allowing the Fed to halt its rate increases.