Fed meeting live updates: Anticipation builds with Fed expected to hike interest rates for first time in 3 years

The market has priced in a roughly 93% chance that the Federal Reserve will raise rates by 25 basis points at tomorrow’s meeting as Kevin Warsh’s FOMC attempts to get a handle on inflation.

That may disproportionally impact the bottom portion of America’s “K-shaped” economy, raising debt servicing costs without providing legitimate relief, according to Mast Investments CIO Yung-Shin Kung.

“The primary mode through which hiking would work is by imparting greater stress on the bottom of the “K” which is already struggling through a supply shock,” Kung wrote on Tuesday. “Hiking would be a high-sacrifice-ratio, poorly targeted tool that extracts most of its cost from people who aren’t the source of the inflation problem.”

Primary responsibility for the inflation crisis, Kung said, belongs to tariffs, the AI buildout, the oil supply stock, and stock market wealth accumulation — all of which he argues are better addressed through balance sheet adjustments by the Fed, not by moving rates. Raising rates doesn’t create more oil, the argument goes.

Lower-income consumers would effectively see their wallets hit twice, Kung said. First, they must pay the increased prices seen on categories such as food and housing, “which a funds-rate hike barely touches.” Then, tighter credit conditions make debt servicing more expensive.

Meanwhile, Kung said, “the real driver of any genuine excess demand sails through mostly unaffected.”