Fed to hike rates by 25bp at every meeting until November – TDS

In spite of recent developments, strategists at TS Securities believe the Federal Reserve is still likely to start raising rates in March. However, the tightening in financial conditions thus far makes the odds of a 50bp rate hike less likely, so they expect the Fed to hike rates by 25bp at every meeting until November.

Fed to pause after the November hike to reassess policy for several meetings

“While there are clear downside risks posed by geopolitical uncertainty and tighter financial conditions, we do not think that this will derail the Fed from starting the hiking cycle in March. We continue to forecast the Fed to raise rates at the March FOMC meeting, but believe the odds of a 50bp move have fallen significantly.”

“We look for the Fed to start the hiking cycle in March with a 25bp rate hike and deliver six consecutive hikes in 2022. We forecast the Fed funds rate to end the year at 1.5-1.75%.”

“After a pause at year-end and early 2023, we see the Fed raising rates three more times to reach a terminal rate of 2.25-2.50%.”

“We also adjust our US rates forecasts given the tweak to our Fed call but continue to look for the 10y to reach 2.5% by year-end.”