“It is appropriate in my view to be moving a little more quickly…I also think there’s something in the idea of front-end loading those moves…Markets are processing what we’re seeing. They’re reacting appropriately, generally…Fifty basis points will be on the table for the May meeting.”
Fed Chairman Powell could not be any clearer. The market is actually anticipating multiple 50 bps increases with 2 50 bps increases baked into expectations and likely some combination of higher increases.
The world of gradual 25 bps increases is in the past. A lot of Fed funds charts go back to 1990, thirty plus years of data. The big rate increases which surprised the market came in early 1994. Given the current inflation levels, it is instructive to go back to 1970's and 80's. Big increases in rates were normal. It should not be surprising to see 50+ bp increases in 2022.
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