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Interest Rate Hike Odds Crash On Renewed Covid-19 Concerns

Odds of no rate hikes through June 2022 soared today on Covid-19 concerns.
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Target Rate Probabilities for 2022-06 on 2021-11-26

Implied Odds

Yesterday, the implied odds of no rate hikes at the June 2022 FOMC meeting were only 17.9%.

Today, the odds the Fed stands pat are 46.3%.

Fade the Consensus

When it comes to the Fed hiking rates, my most frequent comment is "Fade the Consensus". 

Flashback September 22, 2021: 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.

Dot Plot of Anticipated Rate Hikes 2021-09

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.

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

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Dot Plot December 2018 Fantasyland 

Dot Plot 2018-12-19

My Comments 

  • 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.

Yet, the market does, time and time again.

The Fed governors make absurd projections, the market prices them in, then the amazing bond rallies come out of nowhere for one reason or another. 

Today's rationale is Covid. 

For discussion, please see Stock Selloff Blamed on New Covid-19 Variant, Lockdowns Feared.

For details on lockdowns in 9 countries, please see Stock Selloff Blamed on New Covid-19 Variant, Lockdowns Feared

Wishy-Washy Taper Drivel

And in case you missed it please check out my November 24 column,  Let's Take a Look at the Fed Wishy-Washy Taper Drivel of the Day.

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