Markets price in five Fed rate hikes in 2022, cut by 2025
Fed policy bets are evolving, which may explain why gold has managed an upswing alongside the S&P 500 while the US Dollar has fallen so far in February.
Policymakers’ increasingly assertive posture on stimulus withdrawal coupled with supportive economic data – most recently, January’s payrolls report – have driven up near-term rate hike expectations. The longer view has softened, however.
Fed funds futures imply that the push to price in five 25bps rate hikes for 2022 has likewise seen the 2023 outlook soften, from three such increases to two. A single rise seems to have drifted out to 2024, implying adjustment to a more gradual path after fireworks this year. Strikingly, a cut is now priced in for 2025.
Policymakers’ increasingly assertive posture on stimulus withdrawal coupled with supportive economic data – most recently, January’s payrolls report – have driven up near-term rate hike expectations. The longer view has softened, however.
Fed funds futures imply that the push to price in five 25bps rate hikes for 2022 has likewise seen the 2023 outlook soften, from three such increases to two. A single rise seems to have drifted out to 2024, implying adjustment to a more gradual path after fireworks this year. Strikingly, a cut is now priced in for 2025.