Fed must hike rates this year as markets want an 'adult in the room': Economist

• BOJ is expected to hike rates due to high inflation and strong economic growth in Japan, with rising JGB yields seen as a 'symptom of success'.
• U.S. fiscal policy is deemed unsustainable, with high and growing debt levels, while the economy shows strong growth (Atlanta Fed projects over 4% for Q3) and historically low unemployment.
• The Fed is anticipated to raise the Fed Funds rate, potentially in September or by year-end, and possibly twice in the next nine months, to anchor inflation expectations and defend the value of longer-term debt.

The economist asserts that the Bank of Japan will hike rates due to domestic inflation and strong economic growth, viewing rising JGB yields as a positive indicator. In contrast, the U.S. Fed is pressured to raise rates this year, possibly in September, to address unsustainable fiscal policy, high growth, and a tight labor market, aiming to anchor inflation expectations and protect long-term debt value.