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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🌟🌟🌟As we mark 1 year anniversary of rate hikes, it has been a turbulent year for many investors in the markets. It seems like the volatility will continue unabated in 2023 as inflation is still high and the Feds are intent on quelling it to its target of 2%.
All eyes will be on Jerome Powell as he takes the stage on March 15 to deliver the much anticipated news of the latest rate hikes. I believe it will be 25bps. However 50 bps is a possibility if the majority of the FOMC panel vote for it.
The markets are fragile, so is the global economy with the possibility of recession. The Feds is walking a tight rope trying to balance the pace of interest rate hikes without causing a recession. But it is an inexact science.
Whatever the outcome maybe, I will continue to stay invested in good quality stocks with a long term horizon which I believe is the best way to attain my goal of FIRE - Financial Independence Retire Early!
@Tiger_chat
对市场事件的反应。调整利率有助于美联储实现满足其双重使命的条件：保持价格稳定和最大化就业。于二零二二年全年，股票市场一直波动。3月份加息肯定不会暂停。官员们在2月份将利率上调了0.25个基点，为去年以来的最低水平。但这并不能保证美联储准备暂停加息。美联储的最终目标区间是5-5.25%。因此，美联储可能会在让步前再加息50个基点。[美元][美元]
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,