The markets now expect the Fed will hike 50 basis points. 0.50 percentage point at its next FOMC meeting on March 16 according to CME Fedwatch.
CPI Jumps Most in 40 Years
The jump in rate hike expectations follows a BLS report that shows CPI Jumps Most Since February 1982
Year-Over-Year Key Details
- The all items index rose 7.5 percent for the 12 months ending January, the largest 12-month increase since the period ending February 1982.
- The all items excluding food and energy index rose 6.0 percent, the largest 12-month change since the period ending August 1982.
Bond Market Reaction
US Treasury bonds reacted negatively to the data which was a bit worse than expected.
Huge Rate Hike Probability Jump
I believe this is the biggest single-day rate hike jump expectation in the CME Fedwatch history.
Expectations are fluctuating wildly however, and now at 71.5% as of 10:48:29 CT.
Key point: The Fed does not like to surprise. I expect various Fed presidents to attempt to walk down this expectation.
Key Point: Rent is supposedly only up 3.8% YOY and OER, the largest CPI component, only 4.1% YOY I do not believe those numbers. A pending hot OER would be very problematic for the Fed.
OER stands for Owners' Equivalent Rent. It is the mythical price one would pay to rent one's own house from oneself, unfurnished and without utilities.
OER is 24.251 percent of the CPI. Rent of primary residence is another 7.398 percent.
National Rent Index Is Up 17.8% Year-Over-Year
On February 5, 2022 I noted The National Rent Index Is Up 17.8% Year-Over-Year, the BLS Says 3.3%
The new numbers from the BLS, as of January 2022, are 3.8% for rent and 4.1% for OER. I believe both numbers are low.
Double hike now 97.6%.
This post originated at MishTalk.Com.
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