VIEW: Scotiabank Pull Fed Hiking Cycle Call Higher

Scotiabank now “believe the Federal will need to hike its policy rate to 5.00% by early ’23, 150bp more than our previous forecast.”

• “It is clear that the Federal Reserve is less forward-looking and more data-dependent than reaction functions typically assume.”
• “Inflation has remained stubbornly elevated, and the most recent monthly prints do not suggest a cooling of pressures despite a large reduction in some of the upstream drivers of inflation.”
• “Confidence in inflation forecasts is low. This has prompted the Fed to indicate through its dot plot that it plans to hike interest rates to 4.50% by the end of this year. While we normally don’t pay too much attention to the dot plot, the fact that the Fed is communicating a need for such a tightening in just under three months gives them very little room to not follow through on this guidance.”