The Federal Reserve this week will deliver its largest rate hike in 28 years to tackle scorching inflation, a move that should push the US dollar to a fresh high against its major currency rivals, Jefferies said Monday.

• The Federal Reserve will raise interest rates by 75 basis points this Wednesday, said Jefferies in a note Monday.

• Jefferies changed its call from 50 basis points after the May inflation reading hit a 41-year high of 8.6%.

• The US Dollar Index on Monday reached a fresh 20-year high above 105.

Jefferies projected the central bank will increase the federal funds rate by 75 basis points when it concludes its two-day meeting on Wednesday. An increase of that size would be the largest since November 1994 when Alan Greenspan was serving as chairman.

"Ourselves and Barclays have increased our Fed rate call to 75bps from 50bps at this meeting as we not only think the Fed SHOULD hike but that they actually WILL hike by that order of magnitude," Brad Bechtel, global head of FX at Jefferies, in a note released Monday.

Barclays on Friday switched its call to 75 basis points after the Bureau of Labor Statistics said the Consumer Price Index rose 8.6% in the year through May, in part as fuel prices zipped higher. Economists surveyed by Bloomberg had expected a reading of 8.3% and the print confounded some expectations for an April inflation peak.

There's a "very compelling case for why [the Fed]  will go that order of magnitude given how far they appear to be slipping behind the curve, how much pressure the administration and the Fed itself are under in this regard and how the combination of elevated CPI and declining consumer confidence really paints an ugly picture for how the US economy is shaping up," said Bechtel.

Bechtel said a move of 75 basis points will be a surprise for some who are "holding a hard line" on expectations for the Fed, led by Chairman Jerome Powell, to raise the key rate by half a percentage point. The widely watched US Dollar Index  is "likely to rip through 105.00" on a Fed hike of that large size, he said.