11 rate hikes?

BofA sees 7 rate hikes this year, 4 next. Quarter-point each time. That’s nearly 3% jump. Talk about a macro hit.


Time to stock up on more VTV.

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Huh… that’s not just taking away the punch bowl, that’s kicking the party-goers out without even yelling “LAST CALL!!”

Seems like now’s a good time to invest in Tums and Rolaids… I can only imagine how many ulcers are forming in boardrooms as they realize there will be no debt-financed buybacks or dividends for the next couple years.

Mike Shedlock (Mish), who founded this board, dismissed this out of hand. Just because a bank economist says something doesn’t mean it will actually happen.


Then again, it might…in which case, watch out!


If you averaged out all the predictions, I wonder what the result would be…

Most likely a steaming pile of stuff you don’t want to step on.

The Captain
likes to keep his shoe soles clean…

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BofA sees 7 rate hikes this year, 4 next. Quarter-point each time. That’s nearly 3% jump. Talk about a macro hit.

IIRC, the were nine rate hikes, 2016-2018. What was the macro hit?


A 3% interest rate when inflation has been running about 7% is still better than “free money” unless inflation drops lower than 3%.

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This thread started about 6 weeks ago. Since then, inflation is high, the economy is booming, oil prices are higher, and a war started. Fed dot plot now says 2.75% Fed funds rate at the end of 2023.

Rate increases have been seen before (1994, 2004, 2016). What’s different this time is the extraordinarily high inflation. Inflation is at 40-year highs, and many of the questions at the March Press Conference asked why the Fed is behind the curve of inflation. Inflation has been above the 2% target for over a year, and yet the Fed is only slowly acting. Fed monetary policy remains expansionary until the end of 2022. An expansionary monetary policy while the economy is booming and inflation is high. The Fed contributed to inflation by being so slow to act. The futures market is now saying 50 bps rate hikes are likely at the next 2 meetings.

An end to ZIRP will affect some high risk stocks because of the higher discount rate. A continuation of ZIRP is a bigger risk to the overall stock market, because of inflation surprises and asset bubbles. Some people want the economy to run hot in an effort to boost median wages. The Fed departed from a firm 2% inflation target to a long-term average goal, saying short-term inflation could be allowed to run hot. We are seeing the effects of these policies now in much higher inflation.

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Previous 2% rate hikes started in 1994, 2004, and 2016.

Trimmed Mean PCE Inflation Rate
Inflation has been above 2% since February 2021.

Real Gross Domestic Product
GDP growth has been above 4% per year since Q2 2021.

The Fed’s Dot Plot target median rate is 2% end of 2022, 2.75% end of 2023.

Target Rate Probabilities
Current target rate of 25-50 bps
May 4th: 66% probability of 75-100 bps target rate
June 15th: 66% probability of 125-150 bps target rate
July 27th: 52% probability of 150-175 bps target rate
December 14th: 94% probability of 200-275 bps target rate
July 26, 2023: 75% probability of 250-325 bps target rate

Chair Powell’s Press Conference
“But given the current data, how far behind the curve of inflation do you believe the Federal Reserve is in your mind?.. , the probability of a recession within the next year is not particularly elevated… we do feel the economy is very strong and well positioned to withstand tighter monetary policy.”

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