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Incoming Fed Rate Hikes — Brian Romanchuk

Summary:
Inflation data in the United States came in surprisingly hot, and so rate hike chatter went off the charts. I think the idea of a “surprise” inter-meeting rate hike is silly in the context of modern Federal Reserve operating procedures, but I now see more chance of an initial 50 basis point rate hike in March as an attempt to assert dominance.Unless inflation cools a lot, the base case has to be that we are looking at 25 basis points per meeting (plus the wild card of a starting 50) for forecast horizons going out a year. The pricing I have seen is consistent with this, so this should not be a surprise to anyone. After the one year horizon, far more uncertainty creeps into inflation/growth forecasts.Since I do not think anything of interest happened, I will mainly repeat points that are

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Inflation data in the United States came in surprisingly hot, and so rate hike chatter went off the charts. I think the idea of a “surprise” inter-meeting rate hike is silly in the context of modern Federal Reserve operating procedures, but I now see more chance of an initial 50 basis point rate hike in March as an attempt to assert dominance.

Unless inflation cools a lot, the base case has to be that we are looking at 25 basis points per meeting (plus the wild card of a starting 50) for forecast horizons going out a year. The pricing I have seen is consistent with this, so this should not be a surprise to anyone. After the one year horizon, far more uncertainty creeps into inflation/growth forecasts.

Since I do not think anything of interest happened, I will mainly repeat points that are not commonly appreciated....
Bond Economics
Incoming Fed Rate Hikes
Brian Romanchuk
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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