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