Rumors Swirling of an Emergency Fed Rate Hike as Early as Today or Monday “Because Inflation Is Getting Out of Hand”
Rumors are swirling that the Fed will make an emergency rate hike and this might happen as early as today (Friday).
Early Thursday morning the government’s estimate for inflation was released and it was terrible. Inflation is up to a 40 year high at over 7.5%. The rate of inflation was up half a percent higher than expectations. The prices for everything are rising astronomically and Americans are feeling the pressure.
The Biden Effect: Inflation Hits 7.5% – Highest Annual Increase in 40 Years and Higher than Expected – Up Half a Point in One Month
Later on Thursday, reports came out that the Fed may drop an emergency rate increase of half a percent on Friday or Monday. Zerohedge dropped a report that shocked the financial world.
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With the punditry obsessing over the March FOMC meeting, where odds earlier today hit 100% of a 50bps rate hike before easing modestly (and more than 6 hikes for all of 2022)…
Why is this notable? Because the February contract expires on Feb 28, more than two weeks before the March 16 FOMC decision. This means that someone is preparing for an intermeeting rate hike, some time before March. And plugging in the numbers, the 13bps in the Feb contract means that there is now a 30% chance of an emergency rate hike.
Impossible? Not according to Fed watcher and SGH Macro strategist Tim Duy who writes that he would “not be surprised by an intermeeting move either tomorrow Friday or by Monday. I know, this is crazy aggressive.”
Aggressive? yes. Crazy? perhaps – after all the Fed is still buying bonds as part of its ongoing QE which is expected to conclude in late February/early March.
In other words, we may soon face the monetary paradox of the Fed hiking rates even as the Fed is still easing monetary policy through QE, and the biggest joke here – the Fed would be tightening conditions to contain inflation that is almost entirely supply-driven and which the Fed has no control over.
Other experts are chiming in. It is very likely rates will be raised very soon because “inflation is getting out of hand”.