Frontloading Hikes Could Ease Landing

Frontloading rate hikes might make it easier to curb inflation and achieve a “soft landing,” says Kristina Hooper, Invesco’s chief global market strategist. At its June meeting, the U.S. Federal Reserve decided it needed a “bigger boat” to fight inflation. That took the form of a 75 basis point rate hike and more aggressive expectations for future hikes. The rationale was, not just the most recent Consumer Price Index print, but also an increase in longer-term consumer inflation expectations. While it is “getting harder” to get a “soft landing,” she says it still possible. She believes inflation will peak soon and slowly moderate for Western developed economies. However, the only factor that central banks can control is demand; there are external factors, such as the Russia-Ukraine war and COVID shutdowns in China, that could have a significant impact.