Proactive Investors - Wall Street firm Wells Fargo (NYSE:WFC) has ranked financial instability over inflation as the biggest risk facing the American economy for the next three months.
The firm’s head of macro strategy Michael Schumacher told CNBC’s “Fast Money” in an interview following the Federal Reserve’s 0.25% interest rate hike on Wednesday that policymakers were underestimating how quickly tightening credit conditions could hurt the economy.
“The Fed is not really giving enough credence to the idea that tighter credit means things weaken in a fairly quick manner,” he said.
He told CNBC that it will take a month or two to get clarity on credit conditions.
“It’s hard to say right now whether the Fed has tightened enough or too much,” Schumacher said.
“That’s why the market has been bouncing around so much, whether it’s the equity market or the bond market. People are trying to get a read on this.”
Schumacher added that, as long as the financial sector can avoid another meltdown, he believes the Fed will hold interest rates higher for longer because inflation is still too high.
“We’re telling clients the Fed probably hikes rates one more time,” he said. “We’d be shocked if it was more than that.”