VIEW: J.P.Morgan Now Look For 50bp Hikes At Next Two Fed Meetings

J.P.Morgan note that “as widely expected, the Fed hiked the target range for the fed funds rate by 50bp today, to 0.75% to 1.0%. Another well-telegraphed action taken this afternoon was the announcement of the start of balance sheet reduction, effective at the beginning of June. These two expected hawkish policy decisions were counterbalanced by what the market saw as the most important takeaway of the day: the Chair’s dovish swatting down of expectations for a 75bp hike anytime soon. On the other hand, Powell said in his prepared remarks that “there is a broad sense on the Committee that additional 50 basis point increases should be on the table at the next couple of meetings.” Powell’s predecessor Yellen once remarked “The dictionary says a couple means two,” a definition that Powell aligned with in the Q&A, and so in addition to the 50bp hike we were expecting in June, we now also expect a 50bp move in July, and terminal funds rate early next year of 3.0-3.25%.”