Federal Reserve policymakers are likely to raise interest rates this month and again later in the year.

The Fed’s cautious approach stems from a desire to avoid repeating the 1970s, when the Fed prematurely eased inflation control only to see prices rise to double-digit levels.

Investors are betting the Fed’s July 25-26 quarter-point rise will be its last in this credit tightening cycle.

Stock and bond prices rose on such predictions, with the yield on the Treasury’s two-year note falling to 4.76% from 4.95% on July 7.

Fed officials are cautious about reading too much into any one month’s data, as they have been deceived before by pricing pressure let-ups just to have them pick up.

Due to the lack of a credit constraint, policymakers are more comfortable raising rates again.

Policymakers are startled by more than inflation, as the economy and labor market have held up.

The labor market may need to soften to return inflation to the Fed’s 2% target, as evidenced by last month’s payroll growth of 209,000, the lowest since 2020 but still more than twice Powell’s long-term target of 100,000.