1Y Anniversary of Rate Hike - When Will Fed Stop and Pivot?
It was a year ago this month that the Fed launched its rate hike to combat inflation.
At first, policymakers only take 25 basis points to tackle price surges. Subsequent months saw much larger hikes, enough to raise the Fed’s benchmark borrowing rate by 4.5 percentage points to its highest level since 2007.
At this 1 year anniversary, we can review these questions:
- what's the end of the rate hike cycle?
- when will Fed stop rate hikes and turn to rate cuts?
- what's the target rate for March?
1. What’s the end of this rate hike cycle? - 5.5% is a consensus
The benchmark rate currently ranges between 4.5% and 4.75%.
Markets figure the Fed will take that rate up to a range between 5.25%-5.5% before stopping, according to futures trading data.
Swaps markets are pricing a peak Fed policy rate of 5.5% in September while some traders are betting the benchmark interest rate could rise to 6%.
Kashkari reiterated that in December he saw the fed funds rate rising to as high as 5.4% in this tightening cycle. Financial-market bets for the peak rate reached 5.5% Wednesday.
2. When will Fed stop rate hikes and turn to rate cut?
1) Stop rate hikes in summer?
US stocks stopped losses after Federal Reserve Bank of Atlanta President Raphael Bostic said
the central bank could be in a position to pause rate hikes sometime this summer.
While Bostic’s remarks boosted sentiment Thursday, other central-bank officials in recent days have reinforced their hawkish rhetoric.
2) Won't cut rates in 2023?
In January, the market expected the last rate hike of 25bps in March and a rate cut at the end of the year. However, the reality was contrary to expectations.
Based on Fed rate futures pricing, the market has widely expected the end of the current rate hike cycle at 5.25%-5.5% and little chance of a year-end rate cut.
3. How much will Fed increase in March?
As of today, there are 74.8% probabilities that Fed will increase 25 bps. However, the probabilities will change after the CPI.
Some Fed officials also expressed that they may support 50bps in March.
Minutes from the Jan. 31-Feb. 1 FOMC meeting showed that“a few”participants favored or could have supported a 50 basis-point increase.
How do you view 1-year anniversary of rate hikes?
How do you expect March rate hikes?
Leave your comment here to win tiger coins~
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🌟🌟🌟在我们纪念加息一周年之际，对市场上的许多投资者来说，这是动荡的一年。由于通胀率仍然很高，美联储打算将其抑制到2%的目标，波动性似乎将在2023年继续有增无减。
所有的目光都将集中在杰罗姆·鲍威尔身上，他将于3月15日登台发布备受期待的最新加息消息。我相信会是25个基点。然而，如果FOMC小组的大多数人投票赞成，50个基点是可能的。
市场很脆弱，全球经济也很脆弱，有可能出现衰退。美联储正在走钢丝，试图在不导致经济衰退的情况下平衡加息的速度。但这是一门不精确的科学。
无论结果如何，我将继续长期投资于高质量的股票，我相信这是实现我的财务独立目标的最好方法，早点退休吧！
@Tiger_chat
response to happenings in the market. Adjusting tates helps the Fed achieve conditions that satify their dual mandare: Keep prices stabke and maximize employment. The stock market has been volatile for the whole year of 2022. There is definitely no pause of rate hikes in the month of March. Officials in February raised rates by 0.25% bps, the smallest since last year. But that is no guarantee that the Fed is ready to pause rate hike. The Fed’s final target range is 5-5.25%. So the Fed will likely raise interest rates by another 50 basis points before it backs down. [USD][USD]
As we mark the one-year anniversary of the Federal Reserve's rate hike to combat inflation, I urge the Fed to adopt a more slow and steady approach to monetary policy. Specifically, I recommend a 25 basis point increase in March and continued gradual increases through 2024 for a soft landing.
Sudden and aggressive rate hikes can destabilize financial markets and slow down economic growth, while a gradual increase will give businesses and individuals time to adjust to higher borrowing costs, reducing the risk of defaults and financial instability.
Finding the right balance between inflation and economic growth is a complex task, but a gradual and deliberate approach is the best way forward. I encourage the Fed to act in the best interest of the broader economy and carefully consider the long-term implications of its policy decisions.
Thank you for your attention to this matter.
I urge you to adopt a more hawkish policy to combat inflation. Past examples, such as the policies of Paul Volcker and the Bank of Canada, have shown that a hawkish approach can be effective in controlling inflation.
I propose a 50 basis point increase in interest rates at the upcoming meeting in March 2023. While this decision may be difficult, the long-term benefits of a more hawkish policy far outweigh the short-term costs. A 50 basis point increase would send a strong message to the markets and help to prevent future inflationary pressures from spiraling out of control.
Thank you for your attention to this matter.
Sincerely,