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Fed expected to stick with hawkish rate hikes until data show further slowing in inflation

The Federal Reserve is unlikely to pivot from its hawkish interest rate hikes despite positive signs this week that inflation in the U.S. could be easing, according to market strategists.

As both CPI and PPI soften, markets have started to moderate their expectations for Fed rate hikes.

But that doesn’t mean it is “mission complete” for the Fed, said Ben Emons, managing director of global macro strategy at Medley Global Advisors.

Victoria Fernandez, chief market strategist at Crossmark Global Investments, said the Fed is nowhere near putting the brakes and turning dovish on rate hikes, given the current data.
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https://www.cnbc.com/2022/08/12/fed...ish-interest-rate-hikes-strategists-say-.html
 
Fed sees interest rate hikes continuing until inflation eases substantially, minutes show

Federal Reserve officials at their July meeting indicated they likely would not consider pulling back on interest rate hikes until inflation came down substantially, according to minutes from the session released Wednesday.

During a meeting in which the central bank approved a 0.75 percentage point rate hike, policymakers expressed resolve to bring down inflation that is running well above the Fed’s desired 2% level.
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https://www.cnbc.com/2022/08/17/fed-minutes-july-2022-.html
 
The Fed is now expected to keep raising rates then hold them there, CNBC survey shows

Wall Street finally looks to be embracing the idea that the Federal Reserve will hike rates into restrictive territory and stay there, according to the latest CNBC Fed Survey.

The central bank is forecast to keep hiking until the rate peaks in March 2023 at 4.26%.

There is growing concern among respondents that the Fed will overdo its tightening and cause a recession.
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https://www.cnbc.com/2022/09/20/the...s-then-hold-them-there-cnbc-survey-shows.html
 
Here’s everything the Federal Reserve is expected to do today

The Federal Reserve is widely expected to raise its benchmark interest rate by 0.75 percentage point at its meeting that concludes Wednesday.

Other items markets will be watching include quarterly economic and rate projections and Chairman Jerome Powell’s post-meeting news conference.

Judging by recent market action and commentary, the expectation is for a hawkish hard line.
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https://www.cnbc.com/2022/09/21/heres-everything-the-federal-reserve-is-expected-to-do-today.html
 
New York Fed President John Williams gave a speech today (11/28) where he said he expects inflation to cool in the coming year but not quite to the Fed's target rate of 2%. This implies that the Fed will still need to be actively tightening monetary policy in year by his projections. John Williams avoided specifics about the coming FOMC meeting where investors expect the Fed to raise borrowing costs by 0.50%.

[h=1]Fed’s Williams Says Inflation Fight Could Last Into 2024[/h]
 
Powell stresses need for Fed’s political independence while tackling inflation

Fed Chairman Jerome Powell noted that stabilizing prices requires making tough decisions that can be unpopular politically.

In other remarks, the central bank leader said the Fed is “not, and will not be, a ‘climate policymaker.’”

The speech did not contain any direct clues about where policy is headed for a Fed that raised interest rates seven times in 2022, for a total of 4.25 percentage points, and has indicated that more increases likely are on the way this year.
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https://www.cnbc.com/2023/01/10/pow...al-independence-while-tackling-inflation.html
 
Markets fully price in quarter-point interest rate hike in February as inflation slows

The FOMC raised borrowing costs by 0.50% in December following a succession of 0.75% hikes. The market is convinced the early February FOMC meeting will result in a 0.25% hike.

The current probability of a 0.25% sits around 95% leaving a 5% probability for a 0.50% rate hike. A week prior the 0.25% hike was just a 76% probability. The latest economic data including today's PPI and retail sales gives economist confidence that the FOMC will be comfortable to let off the brake a bit more.

The only problem is the market could be setting itself up for disappointment.

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