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BofA: 6-7 Hikes Likely To Be Priced For 2022

FED

One of the more hawkish Fed views comes from BofA, which writes that the January FOMC reinforced their view that the market is underpricing 2022 hikes.

  • As the Fed tightens beyond market expectations, rates will rise across the curve with a bear flattening bias.
  • BofA thinks the market “will likely price” 6 to 7 2022 hikes “and encourage clients to position as such.”
  • They also expect traders “will continue challenging the Fed towards a 50bps hike in March.” If 50bps gets priced in, they expect the Fed following through with it, “given their current "humble" & "nimble" approach to setting policy.”
  • The release of the principles for QT skew risks for an announcement in May, vs BofA’s current base case of June.
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