<\/p>\n
Making decisions about how to best spend your hard-earned money isn’t easy, particularly nowadays, given how credit card and mortgage rates have risen. Unfortunately, the situation isn’t going to get any better anytime soon and may worsen, according to longtime fund manager Chris Versace‘s latest Federal Reserve interest rate prediction.<\/p>\n
Versace, a money manager who has been tracking markets since the 1990s, believes the next decision from the Fed won’t be to cut rates. Instead, he says that the next move is likely an interest rate hike when the Federal Open Market Committee meeting wraps up on September 16.<\/p>\n
Versace’s opinion is that the economic data that has landed over the past few months, including inflation data driven by Middle East oil price pressure, puts Fed Chairman Kevin Warsch in a corner.<\/p>\n
The Consumer Price Index data is the final straw for the Fed<\/p>\n
We all thought we were making progress in 2024, but the August Consumer Price Index report shows that the Fed’s 2% inflation target is nothing more than a pipe dream.<\/p>\n
After tariffs caused inflation to stop declining as companies boosted prices and sold less for more (shrinkflation is real), we’ve now seen the Middle East conflict spike oil prices, which in turn is once again causing prices to climb. <\/p>\n
Also read: Middle East, Ukraine just dealt another blow to your wallet<\/p>\n
According to the Bureau of Labor Statistics, headline inflation was 3.4% in August. Strip out volatile food and energy costs, and you still see price problems. Core CPI rose 2.4%. <\/p>\n
Versace put the Fed’s reaction to inflation data bluntly, writing “It’s hard to not see the Fed delivering a 25-basis point rate hike,” in a note to TheStreet Pro members.<\/p>\n
The Federal Reserve may hike interest rates at the FOMC meeting on September 16, 2026.<\/p>\n
BRENDAN SMIALOWSKI \/ Getty Images<\/p>\n
Higher rates are not what the market, consumers, or even the Fed, really want<\/p>\n
Stocks have enjoyed a historic AI-frenzy-driven run-up since 2022’s bear market drop. Earnings have surged as trillions of dollars have flowed into spinning up controversial data centers nationwide, propping up economic growth.<\/p>\n
However, economic growth adds inflationary pressure, and crimping spending by raising the Fed Funds Rate is the Federal Reserve’s best way to wrestle inflation lower.<\/p>\n
More Fed:<\/p>\n
J.P. Morgan drops Fed rate bombshell over Warsh, inflation<\/p>\n
Fed interest-rate decision rocks Wall Street’s inflation fears<\/p>\n
BofA says Fed hike today would be one for the books<\/p>\n
Raising rates to tap down demand, and thus, inflation, works, but is hardly a popular move, especially given how expensive it is to borrow on credit already.<\/p>\n
The average credit card interest rate is 19.56%, according to Bankrate. As of September 11, new credit cards charge 23.82%, according to LendingTree. <\/p>\n
In the second quarter, the delinquency rate on credit card loans was 2.85%, ranking amongst the highest levels since 2012, when consumers were still struggling post the Great Financial Crisis, according to data from the St. Louis Federal Reserve.<\/p>\n
Mortgage rates are also already under pressure due to expectations for higher rates. Most banks benchmark mortgage rates to the 10-year Treasury Yield, which has surged to 4.97%, up from 3.96% in February. As a result, the average mortgage rate hit 7% this past week. <\/p>\n
As our mortgage and housing market expert Laura Grace Tarpley pointed out:<\/p>\n
“The MND mortgage rate was 6.89% on Sept. 8. Then it jumped by 0.08% on Sept. 9 and 0.10% on Sept. 10. Those are significant increases — until now, the largest day-to-day rate change in the past month had been 0.06%.”<\/p>\n
Investors aren’t likely to be fans of a rate hike either, given that the resulting slower growth from higher rates means lower corporate profits. <\/p>\n
And Warsh himself, likely, isn’t thrilled with the prospect of higher rates, given his installation at the Fed was predicated on President Trump’s anger at former Chairman Jerome Powell for maintaining higher rates.<\/p>\n
Still Warsh may not have a choice, given the data.<\/p>\n
“While the market would cheer another pause in monetary policy, it would also call into question Kevin Warsh’s credibility as Fed Chair following his Jackson Hole comments and others from him that, on his watch, monetary policy doesn’t rest on any one data point,” said Versace.<\/p>\n
Now read: Fed rate-hike odds surge as Warsh faces inflation-weary markets<\/p>\n
#Veteran #fund #manager039s #Fed #interest #rate #hike #prediction #frustrate #consumers<\/p>\n","protected":false},"excerpt":{"rendered":"
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