JPMorgan: Adding A 2022 Hike, Subtracting One In 2023

JPMorgan has increased its Fed hike expectations in 2022 to 5, from 4 previously - but are offsetting this with a reduction to 3 hikes in 2023, from 4 previously.

• They see hikes in March and May, a pause in June to announce balance sheet runoff, hiking again in July, and "perhaps another pause in September to assess how well the economy is to adjusting higher rates. If developments call for more tightening than in our forecast, we would first remove these pauses before penciling in 50bps moves." The 4th and 5th hikes would be Nov and Dec.
• Of course, it was Powell's comments Wednesday that spurred JPM's forecast change, and they "were clearly intended to dissuade the market from expecting a quarterly tempo of rate hikes." "Given this signaling, skipping May—after presumably lifting off in March—could undo what Powell sought to achieve this week."
• But looking to 2023, JPM expects fiscal policy to be far less accommodative, and warn of a potentially "rancorous battle over the debt ceiling" in H2 2023: "not an environment in which the Fed would comfortably continue raising interest rates". So hikes in Jan/Feb, Mar, and Jun 2023 before halting for the rest of the year.