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Policy Normalization Refrain; QE to QT

FED
Markets eager for details of timing of policy normalization getting an earful this morning ahead of Chairman Powell's nomination hearing at 1000ET. Link:
https://www.banking.senate.gov/hearings/01/04/2022...
  • Cleveland Fed Mester, KC Fed George, Atlanta Fed Bostic all talking rate hikes starting in March (data dependent) and balance sheet drawdown.
  • Most dealers have moved up timing and number of rate hikes for 2022 as well, up to four starting in March.
  • On Quantitative Tightening, NatWest strategists say the June 14/15 FOMC a close call between second rate hike vs. QT, but not both. "This decision should be highly data dependent. We lean to the Fed announcing a second interest rate hike at the June Meeting, but we envision strong risk to an early start of QT."

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