Former Federal Reserve Vice Chairman Roger Ferguson expects the central bank to deliver two rate hikes this year or early next year, a forecast that aligns with growing hawkish sentiment among Fed officials.
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Former Fed vice chair sees 2 rate hikes this year or next
Former Federal Reserve Vice Chairman Roger Ferguson expects two rate hikes this year or early next year, joining Fed Governor Lisa Cook in signaling that tighter policy may be needed if inflation does not ease.
"I expect two rate hikes this year or early next year," Ferguson, vice chair of The Business Council and former Fed vice chairman, said on CNBC's Squawk Box on Aug. 6.
Cook said she is "prepared to act" on a rate hike to address inflation, according to remarks reported this week. Ferguson also discussed the latest results from The Business Council's CEO confidence survey, which showed executives growing more cautious about the economic environment.
Two rate hikes would mark a notable shift in monetary policy direction, potentially pressuring equities and risk assets while supporting the dollar. The next Federal Open Market Committee meeting will be the key test of whether the Fed follows through on these expectations.
The hawkish tone from Ferguson and Cook comes as the Fed navigates a delicate balance between containing inflation and supporting economic growth. Ferguson's forecast of two hikes suggests the central bank may need to move more aggressively than markets currently anticipate, a view that carries weight given his decade of service as the Fed's second-in-command from 1999 to 2006.
The Business Council's CEO confidence survey, which Ferguson discussed on the program, provides additional context for the rate outlook. The survey results showed executives growing more cautious, a sentiment that could influence how the Fed weighs the risks of tightening too quickly versus too slowly. When corporate leaders pull back on hiring and capital expenditure plans, the Fed faces a more complex trade-off between fighting inflation and protecting the labor market.
Google's AI Leadership Shake-Up
Beyond the Fed, Ferguson also addressed Google's AI leadership shake-up on the program. The leadership changes at the tech giant come as competition in artificial intelligence intensifies, with rivals investing heavily in AI infrastructure and model development. The shake-up reflects the broader pressure on major technology companies to maintain their competitive edge in a rapidly evolving AI landscape.
What Two Rate Hikes Would Mean for Markets
If the Fed delivers two rate hikes, the impact would ripple across asset classes. Higher rates typically pressure equity valuations, particularly for growth and technology stocks that are sensitive to discount rates. The dollar would likely strengthen, potentially weighing on emerging market currencies and commodities priced in dollars.
The timing of the hikes matters as well. If the Fed moves before year-end, it would signal urgency about inflation. If it waits until early next year, it would suggest a more measured approach. Ferguson's forecast of "this year or early next year" leaves room for either scenario, but the direction of travel is clear: the Fed is preparing to tighten, not ease.
For investors, the key question is whether the market has fully priced in this hawkish shift. If two rate hikes are not yet reflected in asset prices, the adjustment could be sharp when the Fed acts. The bearish market sentiment captured in the Business Council survey suggests many executives are already bracing for tighter financial conditions.
This article is for informational purposes only and does not constitute investment advice.
