The market has adjusted its views of how the Federal Reserve will raise interest rates
The Federal Reserve is expected to start raising interest rates next month and not slow down until well into 2023, though the slope of the increases might be a bit gentler.
Events over the past week, including statements from multiple Fed officials and, to a lesser extent, geopolitical turmoil, have convinced markets that the first rate move will be just a quarter percentage point.
That change came after traders had been pricing a move double that size at the March 15-16 Federal Open Market Committee meeting. Central bankers have been dousing the idea of needing to go up 50 basis points at the meeting, with New York Fed President John Williams saying last week that the case was “no compelling argument” for the move.
Still, it hasn't made investors any less nervous about what the path ahead will look like.
“I'm not so worried about whether they do 50 [basis] points out of the gate or not. But I also think they shouldn't overdo it here,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “You can do 25, and if you want to do another one soon, you can do it, rather than add additional disruption or uncertainty.”
Indeed, markets have been volatile in 2022 as inflation has run rampant and pushed the Fed into a position where it is essentially being forced to tighten policy. Consumer prices are up 7.5% over the past year, well ahead of the 2% level that the Fed considers healthy for inflation.
Markets have been playing a guessing game this year, trying to figure out just how far the Fed will go. Current expectations are a certainty for a March increase and a slightly better than 50% probability that the Fed will enact seven hikes this year, which would translate into a raise at each of its remaining meetings, according to CME Group data.
The Russia-Ukraine conflict has added another wrinkle for the Fed. Prices for some commodities such as energy and grains have surged higher as the prospect of a full-blown Russian invasion has intensified. Fed officials will have to weigh the merits of hiking rates to fight inflation against any potential economic slowdown the matter could cause.
However, Paulsen and others say they don't think the situation factors much into Fed thinking, and most economists expect rate hikes to proceed as anticipated.
Late last week, for instance, JPMorgan Chase chief economist Bruce Kasman said he expects the Fed to hike at each of its next nine meetings.
‘Shock and awe' dangers
Paulsen said he agrees the Fed should be raising rates but doing so deliberately.
“If you're going to do shock and awe out of the gate, or let it hang out there that you might, it just adds more uncertainty,” he said. “It would be more helpful if the Fed said we're going to get to this point, but we're going to be measured.”
In remarks Monday, Fed Governor Michelle Bowman lent some credence to the idea when she hinted that a 50-basis-point hike in March is still on the table.
“I will be watching the data closely to judge the appropriate size of an increase at the March meeting,” Bowman said.
Citigroup economist Andrew Hollenhorst said “we would take seriously,” based on Bowman's speech, that such a large first move is at the very least “dependent on the upcoming domestic data.”
One big data point comes Friday, when the Commerce Department releases its personal income and outlays report for January that will include the personal consumption expenditures price index, the Fed's preferred inflation gauge. Policymakers will be focused on the so-called core PCE data, which excludes food and energy and is expected to show a 5.1% year-over-year increase including a 0.5% jump for the month.
If that estimate proves accurate, it will be the fastest one-year acceleration since September 1983.
Chicago Fed President Charles Evans said during an appearance in New York Friday that “the current stance of monetary policy is wrong-footed and needs substantial adjustment.” The words were notable from an FOMC member generally regarded as one of the most dovish, or in favor of loose policy and low interest rates.
“Clearly, it is another understatement to say that inflation has greatly exceeded the moderate persistent overshooting of 2% the Committee sought earlier and that a policy adjustment is in order,” Evans said. “But how big will it need to be?”
美联储预计将在下个月开始加息，直到 2023 年才会放缓，尽管加息的斜率可能会稍微温和一些。 过去一周发生的事件，包括多位美联储官员的声明，以及在较小程度上的地缘政治动荡，已经让市场相信，首次加息将只有 25 个百分点。
这一变化是在交易员在 3 月 15 日至 16 日的联邦公开市场委员会会议上对这一规模的两倍定价之后发生的。央行官员在会议上一直在打消需要上调 50 个基点的想法，纽约联储主席约翰威廉姆斯上周表示，此举“没有令人信服的论据”。
尽管如此，这并没有让投资者对未来的道路变得更加紧张。
“我并不担心他们是否会在门外获得 50 [基础] 分。但我也认为他们不应该在这里做得过火，”Leuthold Group 首席投资策略师 Jim Paulsen 表示。 “你可以做 25 个，如果你想很快再做一个，你可以做，而不是增加额外的干扰或不确定性。”
事实上，由于通货膨胀猖獗并将美联储推向实质上被迫收紧政策的境地，市场在 2022 年一直动荡不安。过去一年，消费者价格上涨了 7.5%，远高于美联储认为对通胀有利的 2% 水平。
今年市场一直在玩猜谜游戏，试图弄清楚美联储会走多远。根据芝商所的数据，目前对 3 月份加息的预期是肯定的，美联储今年将实施七次加息的可能性略高于 50%，这将转化为在其剩余的每次会议上加息。
俄罗斯与乌克兰的冲突给美联储增添了另一个问题。随着俄罗斯全面入侵的前景加剧，能源和谷物等一些大宗商品的价格飙升。美联储官员将不得不权衡加息以对抗通胀的好处与此事可能导致的任何潜在经济放缓。
然而，保尔森和其他人表示，他们认为这种情况对美联储的想法影响不大，大多数经济学家预计加息将如预期般进行。
例如，上周晚些时候，摩根大通首席经济学家布鲁斯·卡斯曼（Bruce Kasman）表示，他预计美联储将在接下来的九次会议中每一次加息。
“震惊和敬畏”的危险
保尔森表示，他同意美联储应该加息，但这样做是故意的。
他说：“如果你要在门口表现出震惊和敬畏，或者让它挂在那里，你可能会这样做，它只会增加更多的不确定性。” “如果美联储说我们将达到这一点，那将更有帮助，但我们将受到衡量。”
在周一的讲话中，美联储理事米歇尔·鲍曼暗示 3 月份加息 50 个基点仍在讨论中，这为这一想法提供了一些可信度。
“我将密切关注数据，以判断 3 月会议上增加的适当规模，”鲍曼说。
花旗集团经济学家安德鲁·霍伦霍斯特（Andrew Hollenhorst）表示，根据鲍曼的讲话，“我们会认真对待”，如此大规模的第一步行动至少“取决于即将到来的国内数据”。
周五，美国商务部发布了 1 月份的个人收入和支出报告，其中将包括个人消费支出价格指数，这是美联储首选的通胀指标。政策制定者将关注所谓的核心 PCE 数据，该数据不包括食品和能源，预计将显示同比增长 5.1%，其中本月增长 0.5%。
如果这个估计被证明是准确的，这将是自 1983 年 9 月以来最快的一年加速。
芝加哥联储主席查尔斯埃文斯周五在纽约露面时表示，“当前的货币政策立场是错误的，需要大幅调整。”值得注意的是，一位 FOMC 成员通常被认为是最鸽派或支持宽松政策和低利率的成员之一。
埃文斯说：“很明显，说通胀已经大大超过委员会早些时候寻求的 2% 的温和持续超调，而且政策调整是有序的，这是另一种轻描淡写的说法。” “但它需要多大？”
