MARCH 28, 2022 – FED FOCUSES ON RAISING RATES FASTER TO CURTAIL INFLATION
Fed Chair Jerome Powell spoke to the National Association for Business Economics last week; he said, “inflation is much too high” and wants the central bank to “take the necessary steps to ensure a return to price stability.” He supports greater increases in the borrowing rate if it is warranted, meaning rates could move up at subsequent meetings by 0.5 percent, double their usual quarter of a percentage point rise.
The market odds are rising on bets that the Fed will increase rates by 0.5 percent at each of its next two meetings. According to the CME Fed Watch, the probability is better than 70 percent the Fed reaches 2.25 percent by the end of the year. According to the futures market, the fed funds rate is expected to reach 2.75 percent to 3 percent by September 2023.
Powell acknowledged that central bank officials and many economists “widely underestimated” how long inflationary pressures from Covid would last. He said those pressures were made worse by the war in Ukraine, which has driven the price of oil and other commodities sharply higher.
It is the perfect time to set up interest rate hedging strategies to ensure your business will profit from the beneficial conditions available today for months, or years, to come.