Deutsche: Powell To Affirm Hike Pricing

The Fed will follow through on pre-meeting rhetoric and hike by 50bp while announcing that QT will begin in June, according to Deutsche Bank.

• Statement: Apart from maintaining forward guidance on rates, will tweak 2^nd paragraph to summarize the current assessment of global developments (ie Ukraine / China lockdowns).
• Press conference: Powell to affirm the pricing of further 50bp hikes at Jun and July meetings (though won’t pre-commit to a particular sequence at upcoming meetings) and continue to stress the need to “expeditiously” move to a more neutral policy stance. At the very least, he won’t push back against market pricing. But won’t signal hikes larger than 50bp.
• Powell to emphasize need for rates to rise more clearly above neutral next year; will be interesting to hear how the FOMC sees the nominal rate.
• On QT, any signals Powell offers on potential timeline for MBS sales will be important.
• Future action: 50bp hikes in Jun and Jul, rate to peak at 3.625% around mid-2023. In addition, QT equivalent to another three 25bp increases. Tightening to induce recession beginning in late 2023.