Since the 1970s, the Fed has carried out several single interest rate increases above 50BP, all of which have the characteristics of strong pre-emptive strike, controlling inflation expectations and curbing inflation trend in the cradle.

Although the fundamental background of the past cannot be analogous to the present, Zheshang Securities believes that under the current extreme inflationary pressure, the Federal Reserve needs to suppress inflation expectations by tightening expectations, and increasing interest rates and leading them will help inflation expectations fall as soon as possible, so there is also the possibility of raising interest rates 50BP at the Fed meeting in May and June.

From a historical perspective, the Federal Reserve has the probability of raising interest rates by 50BP in May and June to suppress inflation expectations.

In the past, the Fed has chosen a single rate hike of 50BP or above when faced with different scenarios. The core purpose of raising interest rates by more than 50BP in 1994 and 1987 was to raise interest rates preventatively and to kill inflation in time, so that the real economy was not overheated (the output gap was still negative), which had a lot to do with the policy idea of "pre-emptive strike" (Act Preemptively When You Can) advocated by then Federal Reserve Chairman Alan Greenspan.

The sharp increase in interest rates in the interest rate hike cycle in 1984 is also closely related to Volcker's personal philosophy. Volcker, the chairman of the Federal Reserve who experienced the great stagflation period, was extremely vigilant about the potential risk of inflation and raised interest rates aggressively at the beginning of runaway inflation. stifle inflation expectations in the cradle. There were two sharp interest rate hikes in this cycle, the first was mainly aimed at suppressing the inflationary trend that showed signs of getting out of control, and the main purpose of the second substantial interest rate hike was to eliminate the stickiness of inflation and prevent a rebound.

Judging from the triggering factors of stopping the aggressive interest rate hike (or withdrawing from the interest rate hike cycle), the cessation of the interest rate hike cycle in 1994 and 1987 was accompanied by the bottoming out of unemployment; the rhythm change of the interest rate hike cycle in 1984 was mainly dominated by inflation, and the unemployment rate remained basically stable during this period, and the main driving factor for withdrawing and raising interest rates was the effective control of CPI.

On the whole, many single interest rate increases above 50BP implemented by the Federal Reserve after the 1970s have the characteristics of strong pre-emptive strike, controlling inflation expectations and curbing inflation trend in the cradle. Although the fundamental background of the past cannot be analogous to the present, Zheshang Securities believes that under the current extreme inflationary pressure, the Federal Reserve needs to suppress inflation expectations by tightening expectations, and increasing interest rates and leading them will help inflation expectations fall as soon as possible, so there is also the possibility of raising interest rates 50BP at the Fed meeting in May and June.

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