Some Investors Bet Fed Could Lift Rates to Two-Decade High

Wall Street is making a game plan for a fed-funds rate that some think could hit 6%, the highest since 2000

The Federal Reserve raised interest rates by another 0.75 percentage point to combat inflation, Chairman Jerome Powell said last week. Powell hinted at a possible slowdown in the pace of increases. Photo: Al Drago/Bloomberg News

Investors are bracing for the possibility that a second year of stubborn inflation could force the Federal Reserve to bring interest rates higher than they have been in more than 20 years.

Wall Street pros spent much of this year betting that the Fed’s already aggressive rate moves would quickly cool the economy and stem rising prices. But last week’s better-than-expected jobs report was the latest sign of economic strength to catch investors off guard.

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