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Fed Anticipates Rate Hikes in 2022 and 2023 - Fade This Consensus

Let's investigate the Fed's schedule of anticipated rate hikes and compare what the Fed thinks to what I think.
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Dot Plot of Anticipated Rate Hikes 2021-09

Laugh of the Day

The Fed's Projection Materials that accompanied today's FOMC Stay-the-Course Non-News provides the laugh of the day. 

The vote for no hikes this year was a unanimous 18-0 score by the FOMC participants. After that it gets interesting.

Base Rate Projections

  • 2021: 0.1 
  • 2022: 0.1-0.4 
  • 2023: 0.4-1.1
  • 2024: 0.9-2.1

In 2024, one participant thinks the Fed will have short-term rates at 2.50-2.75%. What a hoot! 

I assure you the participant who thinks the Fed Funds Rate will only be 0.5-0.75% will be closer to the mark.

Interest on National Debt

The national debt is over $28 trillion and rising fast. By 2024 it will be at least $33 trillion. 

At 2.75%, annual interest on the national debt would be $907,500,000,000. Call it $900 billion. 

Of course, the Treasury could lock in 30-year rates now, but it never does and won't again. 

What About a Recession?

The Fed has never forecast a recession and never will. They believe they are omnipotent with unlimited power to stop recessions.

History shows the Fed actually cause recessions.

I bet we see another recession between now and 2024. Even if we don't, the Fed will not hike if there is any weakness at all. 

Previous Dot Plots to Laugh At

Dot Plot 2017-04

That was from the April 2016 meeting. Here are some more Dot Plots with my anecdotes at the time.

Dot Plot June 14, 2017

Dot plot 2017-06-14

Dot Plot September 26, 2018

Dot Plot 2018-09-26 Bullard

Dot Plot December 2018 Fantasyland 

Dot Plot 2018-12-19

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My Comments Then and Now

  • June 2017: "Who the hell is this dreamer?"
  • December 2018: "The expectations for 2020 and 2021 are pure fantasyland material."
  • September 2021: "The expectations for 2023 and 2024 are pure fantasyland material."

If you put any faith at all in these dot plots, you are simply nuts. 

They do not factor in recessions or even slowdowns. Nor do they consider interest on the national debt or deflationary boomer demographics. 

Fed Repeats Inflation Nonsense But Stays the Course For Now

Earlier today I commented Fed Repeats Inflation Nonsense But Stays the Course For Now

In practice, the Fed's policies are so asymmetric that the Fed just starts to hike when it should be slowing.

Of course, the problem is the Fed itself. There should not be a Fed to repeatedly make these mistakes in the first place.

Real World

In the real world, bubbles eventually matter.

The problem is timing. It is very difficult to predict when things finally matter.

But when bubbles do matter, what the Fed then does or says is "Too Late To Matter."

Huge imbalances ensure that another recession is baked in the cake. However,  virtually no one see it coming. 

Another Debt Ceiling Non Crisis Deja Vu Or Does This One Matter?

Why Fix the Plumbing

This morning, I commented Another Debt Ceiling Non Crisis Deja Vu Or Does This One Matter?

Stock market psychology is very important.

In addition to debt ceiling concerns, here are the pending items: An infrastructure package, another $3.5 trillion on top of that, tax hikes, and AOC's demand for 80% clean energy by 2030.

This is a potentially explosive mix on top of a massive stock market overvaluation issue.

A psychology change away from risk will be very important and it's guaranteed to happen at some point. 

If it happens now, some will blame the debt crisis, others China, but stock market greater fool exhaustion will be as good an answer as any.

Huge Credit Stress Starting in China

Meanwhile, in case you missed it, please consider Huge Credit Stress Starting in China May Easily Rock the Whole World

Once again, and right on cue, hyperinflationists are again moaning. Forget about it just as you should discount anticipated Fed rate hikes.

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