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How Many Times Will the Fed Hike Interest Rates in 2022?

Traders are increasingly bearish on treasuries as measured by bets on US treasury futures.
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Target Rate Probabilities for 2022-12 as of 2021-10-25

A per CME Fedwatch as of October 25, 2021, traders see a minimum of two rate hikes in 2022. 

Expectations

  • No Hikes: 6.2%
  • One Hike: 23.3%
  • Two Hikes: 33.4%
  • Three Hikes: 24.3%
  • Four Hikes: 10.0%
  • Five Hikes: 2.4%
  • Six Hikes: 0.3%

Odds On

  • At least two hikes weighs in at 70.4%. 
  • At least three hikes weighs in at 34.57%

The expectation appears to be between 2 and 3 hikes. 

Four or more seems outright preposterous. 

Soft Patch in the Third Quarter or Does a Recession Start?

On October 20, I asked Soft Patch in the Third Quarter or Does a Recession Start?

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Third quarter of 2021 looks very recessionary. 

The bottom line number for third-Quarter GDP is odds on to be negative. The Atlanta Fed model is -1.6% with GDP being positive only due to an inventory build.

By the time the Fed ends tapering a recession might easily be at hand even if one does not start in 2021 Q3.

How Many Hikes?

I am unconvinced the Fed gets in any hikes. Meanwhile however, sentiment is such that any strong data will pencil in bets for that third hike. 

I suggest betting against that idea.

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