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1Y Anniversary of Rate Hike - When Will Fed Stop and Pivot?
@Tiger_comments：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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