Top economist David Rosenberg said the Fed should put bigger rate hikes back on the table after bouts of 'speculative lunacy'
Rosenberg Research & Associates
- The Federal Reserve should weigh up another big interest-rate increase because of recent "speculative lunacy", according to David Rosenberg.
- "I am starting to wonder if 50 basis points shouldn't be back on the table," the top economist said.
- Most traders expect a 25-basis-point hike Wednesday.
The Federal Reserve should consider bringing in a bigger-than-expected rate hike Wednesday to crush a recent bout of speculation in markets, according to top economist David Rosenberg.
"After this recent round of speculative lunacy, I am starting to wonder if 50 basis points tomorrow shouldn't be back on the table," the Rosenberg Research president said on Twitter Tuesday.
His comments came ahead of the Fed's latest policy announcement, with the central bank set to publish its interest-rate decision at 2pm Eastern Time.
Nearly 90% of traders expect chair Jerome Powell to raise borrowing costs by 25 basis points, according to CME Group's Fedwatch tool, while the rest have forecast it won't hike rates at all in a bid to soothe financial markets amid the ongoing banking crisis.
None of the investors surveyed by CME Group expected the 50-basis-point hike that Rosenberg said the Fed should be considering.
The economist didn't elaborate on what he meant by "speculative lunacy" – but he was likely referring to an early-year rally for growth stocks, cryptocurrencies, and meme stocks.
Some of the tech stocks that badly suffered during the Fed's aggressive tightening campaign last year have surged in 2023, even though the central bank has pressed ahead with further interest-rate rises.
Chip manufacturer Nvidia has soared 79% year-to-date, while Tesla has jumped 60% and crypto exchange Coinbase has surged a staggering 137%.
Digital assets have also staged a comeback after rising rates and the high-profile collapse of FTX tanked their value, with bitcoin up 70% to trade at just over $28,000.
Meanwhile, Wall Street Bets favorite GameStop – which came for many to symbolize the "everything bubble" that developed in the aftermath of the COVID-19 pandemic – jumped 44% in Wednesday's premarket after it logged a surprise profit for the first time in two years.