Fed officials are wary of a full percentage-point rate hike

Federal Reserve officials are on track to raise interest rates by 75 basis points for the second straight month when they meet later in July, after policymakers pushed back against a bigger move.

Investors reversed bets on a full percentage-point move after wary comments from officials including Atlanta Fed President Raphael Bostic and St. Louis’s James Bullard, plus a rare bit of good news on inflation.

Shortly after they both spoke Friday morning, data showed U.S. consumers’ long-term inflation expectations declined in early July by more than forecast to 2.8 percent, versus 3.1 percent the month before.

Interest-rate futures contracts currently imply a roughly 1 in 6 chance that the Fed will hike rates by a full point this month, with a 75 basis-point hike regarded as certain.

“Based on what I have heard, absent the most important voice at the table, there seems to be a rally around 75 basis points” of tightening in July, said Mark Spindel, chief investment officer at MBB Capital Partners LLC, referring to Chair Jerome Powell.

The remarks at separate events Friday by Bostic and Bullard were the latest from officials to signal support for a 75 basis-point move, which Powell told reporters last month was on the table for July.

The Fed in June raised the federal funds rate target by 75 basis points — the biggest hike since 1994 — to a range of 1.5 percent to 1.75 percent, after previously signaling it would hike it by 50 basis points. Officials regard another 75 basis points as a powerful jolt to the economy and are keeping an eye on how their policies are affecting growth. Housing markets appear to be cooling, and there are scattered signs that consumption is leveling off.

“The real side looks to be softening. You don’t want to really overdo the rate hikes,” Fed Governor Christopher Waller said Thursday. “A 75 basis-point hike is huge. Don’t say because you are not going 100 you are not doing your job.”