The Federal Reserve has never raised interest rates by a full percentage point at a single meeting — going back to at least 1990, when the Fed began publishing data on meeting by meeting interest rate decisions. But that may change later this month following another hot inflation report.
Consumer prices unexpectedly rose slightly in August from July and were up 8.3% over the past 12 months, a bigger jump than expected. As such, futures that track potential interest rate moves are now pricing in roughly 20% odds of a 100 basis point hike at the Fed's September 21 meeting.
Of course, this means that the market still largely expects another three-quarters of a point increase, or 75 basis points. That would be the Fed's third straight hike of that size, following similarly supersized increases in June and July.
But prior to the Consumer Price Index report Tuesday, investors were expecting a nearly 9% chance of a mere half-point increase. The hope was that inflation pressures would begin to cool more rapidly, making the need for more large rate hikes less necessary.
So much for that.