Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Four Fed Rate Hikes Are Priced In, and Jamie Dimon Wants More

Stock MarketsJan 11, 2022 10:27AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Four Fed Rate Hikes Are Priced In, and Jamie Dimon Wants More

(Bloomberg) -- When it comes to expectations for Federal Reserve rate hikes, what was once seen as radical has practically become conservative. 

Just a few weeks ago, predicting that the Fed would raise rates four times in 2022 would have been considered wildly ambitious. Now, not only is that being priced in, but JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon is saying the U.S. economy can handle even more.

That said, the market remains divided on just how much the Fed will move in 2022. The central bank’s dot plot still only shows three rate increases this year, but Wall Street is becoming increasingly hawkish. Goldman Sachs Group Inc (NYSE:GS). now expects the Fed to raise rates four times this year and start its balance sheet runoff by July at the latest. That echoes similar calls from Citigroup Inc (NYSE:C)., Deutsche Bank AG (NYSE:DB) and JPMorgan last week. And some are willing to go even further. 

“I, personally, would be surprised if it was just four rate increases next year,” Dimon said. “I think four increases of 25 basis points is a very, very little amount and very easy for the economy to absorb.” He pointed to debt payments, increased income and a strong housing market as economic tailwinds.

The idea of four rate hikes in 2022 has accelerated in the first 10 days of the year and is quickly turning into a Street consensus. The spread between the 13th and 1st month fed funds contract, another way to measure rate hike expectations over the next 12 months, shows 3.9 increases priced in. The steepness of the move is most significant, as those expectations have accelerated far more quickly than even the push to cut rates during the trade war in 2019.

Nominal rates are getting the message too. Yields on 10-year Treasury notes have risen 47 basis points on an intraday basis since the start of December, which is the equivalent of almost two rate hikes. Some traders are even hedging against the risk of as many as six rate increases, with bets going as far as suggesting eight quarter-point moves by early 2024.

With Fed Chair Jerome Powell’s congressional confirmation on Tuesday and inflation data due Wednesday, balance sheet reduction is also worth bearing in mind. Whether it happens at the same time as the first rate hike is crucial, as is the method the central bank uses. Selling bonds on the open market would have drastic ripple effects on financial markets. But buying shorter maturity securities and letting them roll of the balance sheet faster also remains an option. 

What’s clear is the Fed has many options at its disposal. And it’s the uncertainty of what it’s about it do that’s leading to bond-market bets that were considered extreme just a few weeks ago.

©2022 Bloomberg L.P.

 

Four Fed Rate Hikes Are Priced In, and Jamie Dimon Wants More
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email