Fed Weighs Rate Hike as Borrowing Costs Surge

The Federal Reserve is weighing an interest-rate hike Wednesday, and Wall Street cannot agree on whether it would calm the market or crack it.

The oddity, as The New York Times framed it, is that the Fed would be raising rates at a moment when borrowing costs are already surging on their own — elevated rates have pushed up the cost of mortgages and car loans without dampening consumer spending.

Bloomberg reports that stocks tied most closely to the health of the US consumer, including names like Walmart, have badly trailed the broader market this year, and a hike could add to that stress.

Who Says What

Albert Edwards of Société Générale, who previously argued inflation was contained, now sees potential for aggressive Fed hikes, according to MarketWatch. He points to gasoline prices that he says are more closely aligned with crude oil at $150 a barrel than with current levels — and says the gap is even more dramatic for diesel.

BlackRock strategist Gargi Pal Chaudhuri opposes a hike. RealClearPolitics ran a piece arguing the Fed should not raise rates at all. ZeroHedge argues the Fed is already within touching distance of the neutral rate.