So we are now at the point where we will actually have a Fed Funds interest rate increase tomorrow–almost certainly 25 basis points (1/4%).
What we don’t know is how dovish or hawkish Jay Powell will be at the press conference after the rate hike is announced.
Here is what I am thinking (my wild a** guess).
Powell will be very careful with his words–we have added the Ukraine/Russia into the equation now so he will have to be careful not to spook the markets. On the other hand inflation is raging so he can’t be too dovish. He will be data dependent–really what else can he say–and that is exactly how it is should be. These wild ‘guesses’ from the smart folks are just baloney–JPMorgan says 9 rates hikes–1 at each of the next 9 months. The JPMorgan dude (or dudette) must be REALLY smart!!
Today we saw a pre rate increase rally in stocks–markets saying “let’s get on with it!”
The 10 year treasury yield moved 2 basis points higher–2.16% although during the coarse of the day the rate fell as low as 2.07%. I thought rates might fall a bit today–maybe tomorrow.
So nothing changes for us–we expected a rate increase and we will get it. I expect another next month–25 basis points–beyond that we will have to see how the economic numbers shake out. The consumer is retrenching with high fuel prices and their confidence is shaken based on prices and Ukraine–no doubt in my mind that the Fed will modify their thoughts a number of times as we go through the year.