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SocGen Bring Forward Fed Rate Hike Expectations

FED
  • They write that the start date for tapering remains clouded by delta and the latest employment report. Yet progress toward the Fed's economic goals is significant, if not yet "substantial"
  • As such, they now see rates hikes to start in early 2023. This is brought forward from their prior projection of late 2023 held since mid-2020. The earlier lift-off is due to GDP reaching highs earlier than expected and inflation running ahead of the 2.0% average
  • The asset-purchase programme should end in mid-2022. SocGen write that a significant majority of Fed officials see hikes by the end of 2022. Such early hikes are neither part of their projection nor part of the Fed dot-plot view yet, but rather Fed officials responding prudently to the need to build a hikes option by late 2022. As such, SocGen expect asset purchases to end by summer 2022.
  • SocGen see a taper starting in January 2022 if not earlier but need to finish by late summer. As such, they see the best scenario as reducing asset purchases by $15bn per FOMC meeting starting with an announcement in November or December this year.
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