The Fed should hike interest rates, says SMBC’s Joe Lavorgna

Summary

Joe Lavorgna, SMBC chief economist, argues the Fed should hike rates at its next meeting, citing a healthy economy, upside inflation risk, and improved labor markets. He and CNBC's Steve Liesman discuss the merits of a surprise hike to break inflation and signal seriousness, noting the market would be caught off guard and would reprice interest rate expectations sharply higher.

• Joe Lavorgna calls for an immediate Fed rate hike, going against market consensus for no change.
• He contends the economy is fine, labor has stabilized, and inflation risks are tilted upward.
• The Fed has missed its inflation target for six years and historically tightening is needed to bring it back down.
• A surprise hike would be a mild shock but would move away from prolonged forward-guidance signaling.
• Steve Liesman highlights that a surprise hike would put markets on high alert and force a hawkish repricing of future rate expectations.
• The discussion centers on the impact on Fed funds futures and the potential for breaking inflation's momentum.