Fed Puts 50bp Hike Back in Play for May

Hawkish Powell sends rates to another multiyear high. The Fed Chair spoke at the NABE conference and struck a substantively different tone than he did during last week’s FOMC press conference, saying that the central bank needs to move “expeditiously” to address inflation and that he’s confident the Fed can tighten policy without a recession. Rates sold off dramatically across the curve, climbing anywhere from 10-18 basis points on the day- the 10-year hitting a 3-year high at 2.315%.

Atlanta Fed President Raphael Bostic expects 6 rate hikes this year. Earlier today, Bostic commented, “Getting the high rates of inflation under control is the top concern for me for 2022.” Bostic sees the Fed’s neutral rate at 2.25% but believes inflation will hit 4.1% by year-end. Bostic echoed Powell’s optimism, commenting that the Fed  “can find an equilibrium without really having to actively slow the economy.” Fed Funds futures are now implying 8 quarter point rate hikes through February 2023.

Day ahead. Tomorrow will be light on economic data, the Richmond Fed’s manufacturing index and mortgage applications the sole highlights. Three different Fed officials will make public comments, Williams, Daily and Mester all with scheduled appearances.