Activity on Fed fund futures hint that there is only about 20% chance of a 50bp hike from the Fed in March. There is room to bet for a more aggressive first rate hike from the Fed if inflation goes further out of control. RateHike FX Forex Trading
was surprisingly strong into the US inflation data, expected to advance to another forty-year high at today’s print.
But there is a risk that investor optimism is premature, and a stronger-than-expected inflation read could send all the recent gains crashing, as there is still room forhawks to price in a tighter Fed policy. Activity on Fed fund futures hint that there is only about 20% chance of a 50bp hike from the Fed in March. There is room to bet for a more aggressive first rate hike from the Fed if inflation goes further out of control.
One last thing about inflation. The Fed cannot do miracles by hiking the rates faster as inflation doesn’t necessarily come from the demand side. One of the biggest drivers of higher consumer prices has been the supply chain crisis.
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