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Re-Pricing Of Larger Fed Hikes Continues

  • Hikes implied by FOMC-dated Fed Funds futures have climbed through the Q&A of Powell's testimony before trimming gains very recently.
  • March pricing is pinned around the 25bp mark after Powell indicated continued support for it but there have been large moves further out.
  • There are now nearly four consecutive 25bp hikes up to and including July (97bp from 88bp at Q&A start & today's low of 73bps) whilst getting closer to six hikes for 2022 again (141bps from 132bp at Q&A start & today's low of 111bp)

Comments have included:

  • Appropriate for us to move ahead, inflation is too high. Need to move carefully and we will, willl be nimble.
  • If inflation stays hot, we could hike 50bp at a meeting.
  • Can't say Ukraine situation has reduced Fed appetite for rate increases. Financial system has enough liquidity to weather war.
  • Supply-side constraints much more durable than expected.
  • Market participants reacting appropriately to Fed.

Fed Funds futures implied hikes as of specific meetingsSource: Bloomberg

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