VIEW: Standard Chartered: Adding A Dovish Q322 Policy Rate Hike

Standard Chartered have advanced their "expected date of the Fed's initial policy rate hike to Q322 (from H123 previously); and now expect two hikes in '23 and one in '24 (previously two in '24)." They now "expect the Fed to emphasise the fact that the U.S. economy is approaching inflation and maximum employment targets, rather than expressing concern about elevated inflation. The message likely will be a gradual pace of further rates hikes rather than an abrupt move."

• The three assumptions driving their view change are "1) maximum employment will be in sight in H222, 2) supply bottlenecks will ease, and 3) effective COVID-19 vaccinations and treatments will be globally available. There is likely to be much less uncertainty about supply to complicate the policy-making calculus."
• They have not "incorporated full market pricing of almost two 25bp fed funds hikes in '22 because pockets of lagging U.S. economic performance are likely to argue against hikes. Employment gains among the minority workforce are lagging - the gap between the Black and White employment-population ratios has widened since the beginning of the pandemic."