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Fed Hikes by 1/4 Point, but Quantitative Tightening QT is the Real News

The Fed announces the first rate hike since 2018. Now what?
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Dot Plot courtesy of the Fed, Annotations by Mish

Dot Plot courtesy of the Fed, Annotations by Mish

Press Release 

Here is a snip from the FOMC Press Release.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.  

The release said virtually nothing that was unexpected. It was the Dot Plot of anticipated hikes in addition to QT that's interesting.

Dot Plot 

The dot plot is out of this world. Seven hikes this year to 2.0% then three more in 2023?

A recession was already baked in the cake. I see zero chance the Fed hikes to 3% and almost no chance of 2%. 

In fact, I would be surprised by four hikes. 

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And QT is supposed to start too? 


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This post originated on MishTalk.Com.

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