Federal Reserve To 'Follow Through' With 0.25% Rate Hike Wednesday, Likely Another Next Meeting, Says Former Atlanta Fed President

If the Federal Reserve raises rates Wednesday afternoon, it will bring the fed funds rate to its highest level in more than 20 years. Former Atlanta Fed president Dennis Lockhart says the Fed has to follow through with a rate hike following last month's pause. 

What To Know: The two-day FOMC meeting will come to a close Wednesday and most expect the committee to raise rates another 0.25%, bringing the target fed funds rate up to a range of 5.25% to 5.5%, including Lockhart.

Wednesday morning on CNBC's "Squawk Box" Lockhart noted that several Fed members have advocated for a 0.25% hike this month and there has been very little pushback from other Fed members. 

"So I think they pretty much have to follow through with that today," he said. 

Last month, the Fed paused after issuing 10 straight rate hikes, but signaled that additional hikes may be needed. Now some are anticipating that the Fed will hike, but signal that a pause could be next. 

Related Link: FOMC Meeting Preview: Powell Faces Crucial Decision As Inflation Data Puts Fed At A Crossroads

Lockhart told CNBC the Fed will be focused on trying to determine the real underlying rate of inflation, which is "not such an easy task."

"I think they'll be looking closely at the inflation data because obviously inflation continues to be their No. 1 priority," he said.

Inflation fell to 3% last month, the lowest levels since March 2021, but it still remains above the Fed's 2% target. The FOMC committee won't meet again until September, so it will have more data to look at before having to make a decision. 

Lockhart is in the camp that projects the Fed is likely to raise rates again in September, but he doesn't expect them to signal anything until new inflation data comes in. 

In June, the Fed took its foot off the gas, partly due to the problems in the banking industry, but now that the sector's weakness appears to have been shored up, Lockhart suggested the Fed is likely to keep inflation in its crosshairs for a while. 

"The turbulence seems to have calmed down. There's news this morning of another merger that takes a weak bank off the table," he said, adding that as a result, he expects at least one more hike to follow Wednesday's presumed hike.

The market is pricing in a 98.9% chance of a 0.25% hike this afternoon, according to CMEGroup's FedWatch tool. Expectations for a subsequent hike in September sit at around 20%. 

SPY Price Action: The SPDR S&P 500 SPY was down 0.14% at $454.78 at the time of writing, according to Benzinga Pro.

Photo: donielle from Flickr.