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
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