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FOMC Preview: 50bp Rate Hike, Announce "commencement of balance sheet runoff".
invite response
2022 May 1, 5:23am 182 views 3 comments
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1
Misc
2022 May 1, 6:04am
Let's see, the GDP dropped at an annual rate of 1.4% the 1st quarter.
https://www.washingtonpost.com/business/2022/04/28/gdp-2022-q1-economy/?source=patrick.net
That's before higher mortgage rates grenaded home construction and cash-out re-fi's.
The federal government is forecast to spend about $1.3 trillion less in 2022 than in 2021 (about 5.6% of GDP).
The stock market is down about 12% so far in 2022 --- sucks for those still holding their stock options.
... AND the Fed wants to slow the economy even more with rate increases and balance sheet run-offs.
What could go wrong????? --- If something does go wrong, they can try the old blame Russia gambit.
https://www.washingtonpost.com/business/2022/04/28/gdp-2022-q1-economy/?source=patrick.net
That's before higher mortgage rates grenaded home construction and cash-out re-fi's.
The federal government is forecast to spend about $1.3 trillion less in 2022 than in 2021 (about 5.6% of GDP).
The stock market is down about 12% so far in 2022 --- sucks for those still holding their stock options.
... AND the Fed wants to slow the economy even more with rate increases and balance sheet run-offs.
What could go wrong????? --- If something does go wrong, they can try the old blame Russia gambit.
3
HeadSet
2022 May 1, 7:45am
HeadSet
2022 May 1, 7:45am
Misc says
Rampant Inflation is not economic growth. That is like Biden saying the GDP dropping is offset by increased consumer spending. Biden doesn't mention that the increased spending is for the same amount of goods - the consumer is not really buying more, he is just paying more for the food, gas, and merchandise he does buy.
the Fed wants to slow the economy even more with rate increases and balance sheet run-offs.
Rampant Inflation is not economic growth. That is like Biden saying the GDP dropping is offset by increased consumer spending. Biden doesn't mention that the increased spending is for the same amount of goods - the consumer is not really buying more, he is just paying more for the food, gas, and merchandise he does buy.
From Merrill Lynch:
"The Fed has signaled a major hawkish shift at this meeting, and we expect them to deliver, with a 50bp rate increase and the announcement of Quantitative Tightening (QT) starting in June.
...
On QT, the minutes of the March FOMC meeting detailed the plans for reducing the size of the balance sheet, indicating general agreement behind monthly caps of $60bn for Treasuries and $35bn for agency MBS phased in over three months or more. These finalized details clear the way for QT to be announced at this meeting, with starting monthly caps of $20bn for Treasuries and $10bn for agency MBS. Importantly, our US rates strategy team believes QT implementation will actually begin with a lag in June."
From Goldman Sachs:
"Policy actions at the May FOMC meeting seem set after Chair Powell and other FOMC members strongly suggested that they intend to raise the policy rate by 50bp and announce the start of balance sheet reduction.
The key question is therefore what comes next. We forecast another 50bp hike in June followed by a deceleration to a 25bp/meeting pace of tightening for the rest of 2022, but see reasonably high chances that the FOMC will continue to hike in 50bp increments until reaching their median neutral rate estimate of 2.25-2.5%. We will therefore be paying close attention to any comments from Chair Powell at the press conference that suggest the FOMC intends to hike in 50bp increments beyond June."
Analysts will be looking for comments on the size of future rate hikes, the pace of the runoff of assets (not reinvesting), and comments on selling MBS in the future.
Note: No projections will be released at this meeting. However, for review, here are the March projections. In March, most participants expected seven rate hikes in 2022.
Wall Street forecasts are being revised down for 2022 due to the ongoing negative supply chain impacts from the pandemic (see China), and the war in Ukraine. For example, Goldman Sachs is now forecasting a 1.6% increase in real GDP, Q4-over-Q4 for 2022, well below the FOMC projections in March.
https://www.calculatedriskblog.com/?source=patrick.net