Will there be a Fed put? – Commerzbank

“Over the past weeks many analysts discussed whether the FOMC will hike its key rate (the target range for the Fed funds rate) by 75bp or 100bp. 100bp are likely to be off the agenda. So, it’s likely to be 75,” Ulrich Leuchtmann, Head of FX and Commodity Research noted in the Daily Currency Briefing published on Wednesday.

Additional Quotes:

“The decisive question is: how will the Fed behave once its rapid rate hikes put a brake on the real economy and possibly even cause a recession?”

“The hawkish interpretation assumes that the Fed is very much conscious of the fact that this high rate hike speed increases the real economic slow-down, but that it is prepared to accept that in view of the urgency of the inflation issue.”

“The dovish interpretation considers the high speed to be the expression of the erroneous assumption that parts of the US administration and US public seem to follow: that the Fed will be able to eliminate the issue of inflation with sufficiently rapid rate hikes almost painlessly. That is why the Fed is much applauded for rapid rate steps.”

“Based on the dovish interpretation, the Fed is far too concerned about its own image and not sufficiently about the optimum monetary policy. If that is the case it would end the rate cycle again very quickly once public opinion changes – possibly too early.”