Economists aren't expecting the central bank to ease up its policy soon. Rather, the Fed needs to ramp up the heat in its battle against inflation.
This post first appeared in 10 Before the Opening Bell, a newsletter by Insider that brings you the inside scoop on what traders are talking about — delivered daily to your inbox. Sign up here. Download Insider's app here.
1. Investors shouldn't bank on smaller Fed hikes because still-high inflation doesn't warrant a pivot, Columbia economics professor Jeremy Sachs said Wednesday.
High prices won't let up anytime soon, Sachs maintained, and that means the Fed will have to continue forward with a heavy hand.
"Expect the Fed to get aggressive," Sachs told CNBC, "because inflation is not simply going to disappear."
Already, the central bank has made two consecutive 75 basis point rate hikes this summer, but inflation is still clocking in near four-decade highs.
And even if the central bank were to lighten up, it'd do nothing to tame the high prices that it caused from all the pandemic stimulus, Sachs added.
Meanwhile, "Dr. Doom" economist Henry Kaufman (no relation to Dr. Doom Nouriel Roubini) said he's still waiting for Jerome Powell to shock the market, and that a dovish move is not what the economy and markets need.
"I'm still waiting for him to act boldly," he told the FT.
The 94-year-old economist — who made a famed 1982 call on interest rates while working at Salomon Brothers — thinks Powell should more closely follow the path forged by former Fed Chair Paul Volcker, who made a series of aggressive rate hikes in his tenure 40 years prior.
"If you want to change someone's view...you can't slap them on the hand," Kaufman said. "You have to hit them in the face."
What do you think? Is it too early to poll the size of the next Fed rate hike? Email me at prosen@insider.com or tweet@philrosenn.
In other news:
2. US stock futures edge up early Thursday, as investors weigh Wednesday's Federal Reserve minutes. Meanwhile, the US dollar index rose to near three-week highs. Here are the latest market moves.
3. On the docket: Estée Lauder Companies Inc., Applied Materials Inc., and Xero Ltd, all reporting. Plus, look out for the US unemployment insurance weekly claims report, due later this morning.
4. Investors shouldn't be fooled by indexes turning higher over recent weeks, Morgan Stanley analysts said. That's because the recent rebound is likely a bear market rally. But they said these 22 undervalued stocks are primed to beat the S&P 500 over the next 12 months.
5. Russia expects prices for its natural gas exports to soar to $730 this year. According to a Reuters report, that forecast is a 140% jump from 2021, and a 39% hike from its previous expectation for 2022. Here's what you want to know.
6. An indicator with a perfect track record shows stocks haven't hit bottom, according to Bank of America. The so-called Rule of 20 has flashed at every market bottom since September 1974 — and some signals suggest investors shouldn't rule out a hard landing just yet.
7. Don't expect Iran to start pumping more oil anytime soon. Goldman Sachs warned in a note to clients that a stalemate between the US and Iran could be "mutually beneficial," not to mention Russia threatens the chances of an agreement coming to fruition. To the bank, a nuclear deal remains far off.
8. Ether could dethrone bitcoin as the dominant cryptocurrency by 2027. A top portfolio manager broke down three primary reasons why ether may turn into the crypto-market-cap king — and there's one bold scenario that could see it happen in the next year.
9. These charts show why stocks still have room to rally in the coming weeks. Stocks have climbed 17% since mid-June, but UBS highlighted why indexes could still move higher and investors could still reap more gains in the near-term. See the five breakdowns here.
10. Americans are changing the way they're spending money. Households are pivoting from buying up goods to spending big on services — and it's helping to keep the economy afloat even as retailers like Target stumble.
Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.
Curated by Phil Rosen in New York. (Feedback or tips? Email prosen@insider.com or tweet @philrosenn).
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.