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Interest Rate Hike Odds Crash On Renewed Covid-19 Concerns

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7 comments on Interest Rate Hike Odds Crash On Renewed Covid-19 Concerns

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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.

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 September 26, 2018

Dot Plot December 2018 Fantasyland 

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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Mike Shedlock

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WarpartySerf
WarpartySerf
4 years ago
Time to screw “the little people” again .   10% inflation now, 0 interest on your money  …….  Poof !   Your money loses 10% (and counting) every 12 months.  All to save the predatory rich –  they’re laughing at everyone.  Powell’s personal piggy bank has gone from $50 million to $80 million since he took over the job of saving the 2% .  And screwing 98% of the population  …….  
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StukiMoi
StukiMoi
4 years ago
Reply to  WarpartySerf
Government policies are no different from any other good/service: Pay more, get more. Only the pathologically childish and naive, fall for the scam that they are some sort of magic which don’t follow entirely universal economic laws.
Ergo, if you want less predatory government, you want less government. Shouldn’t be all that difficult to follow.
As Euroconservatives (those among them who can still read) may point out: There may, despite that obvious, and entirely universal, truism, still be room for some government aka Ancien Regime aka privileged class, no matter how “unfair” that may be to the rest: For the stability such an arrangement may bring, in contrast to every ambitious member of every new generation attempting to warlord his way to Top Khan position.
But if so, the regime must, for one, be largely separate and impenetrable from the masses. Blue Blooded and inbred, IOW. Otherwise, ambitious laymen will just effectively warlord via a pathway of regime connections, which is at least as destructive as doing it militarily, and hence undermines the whole project.
And the regime must also remain small, hence “cheap”, enough that they don’t offend numbers meaningful enough to overthrow them and behead them. Once they start sucking in a large share of people’s value-add to blow on themselves, or redistribute to their buddies or whores, off with their heads….
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thimk
thimk
4 years ago
Hmmm, then we have the case of emerging markets/Canada commencing a tightening cycle . 
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Doug78
Doug78
4 years ago
“In the land of the blind the one-eyed man is king” or so the saying goes. More correctly would be to say that the king of the land of the blind is himself blind but has convinced all the others that he has one eye.
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Casual_Observer2020
Casual_Observer2020
4 years ago
Let’s be honest. Interest rates were headed down before covid because of the trade war the Trump administration had started. One could credibly argue that rates would have fallen irrespective of covid and that the Fed was trapped. Covid just accelerated the future and increased deficit spending faster and allowed the Fed to do what they would have done anyway in the latter part of this decade — monetize the US debt interest. 
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whirlaway
whirlaway
4 years ago
A lot of what happens in the so-called market is because of what I think you are thinking, and you reacting ahead of me because of what you think I think you are thinking etc.    Put all that in the various trading algorithms and you get what we’re seeing here.   
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Scooot
Scooot
4 years ago
I’m in the no rate hike camp for at least the 1st half of 2022, although further lockdowns etc won’t help with shortages and inflationary pressures.
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