In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Tuesday, March 22, 2022

Goldman: Expecting Fed to hike 50bps in May and Start Balance Sheet Reduction

by Calculated Risk on 3/22/2022 09:29:00 AM

A few excerpt from a Goldman Sachs research note: Moving “Expeditiously” Implies a Faster Pace; Forecasting 50bp Hikes in May and June

In a speech [yesterday], Chair Powell said, “There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability.” He repeated the call “to move expeditiously” at the end of the speech. ... We now forecast 50bp hikes at both the May and June meetings, followed by 25bp hikes at the four remaining meetings in the back half of 2022 ... We continue to expect the FOMC to announce the start of balance sheet reduction at the May meeting.
emphasis added
CNBC's Steve Liesman tweeted this morning:
"The Dec. Fed Funds contract trades with an implied yield of 2.13... that means 7 MORE hikes from here or 8 total this year. At least one of those meetings needs to be 50bp. The 50bp probability for May is 68%. There is also going to be balance sheet reduction."
So a 50bps hike - and balance sheet reduction - are becoming the consensus view.