Money markets priced in the expectation of 225 basis points more interest rate hikes from the Fed, which is expected to increase interest rates this year. If the hawkish movements take place in line with the expectations of the markets, the Fed will close the year 2022 with a 2.5 percentage point increase in interest rates. The last time the Fed implemented such a tightening was in 1994. The previous tightening move was in the early 1980s under Paul Volcker.
The issue of whether the US central bank Fed will accelerate interest rate hikes in the face of rising inflation remains at the center of discussions in the country. On the other hand, he started to make hawkish statements from Lael Brainard, a member of the Fed, who is waiting to be vice-president.
On the other hand, Brainard stated that the Fed’s $9 trillion balance sheet will be reduced rapidly compared to previous periods, and said that the balance sheet reductions will contribute to the tightening planned within the framework of the interest rate projections put forward in the forecasts of Fed members.
Apart from Brainard, known as a pigeon by Fed commentators, Kansas City Fed President Esther George, who is on the hawk’s wing, also thinks that the dose of tightening can be increased. George stated that besides the balance sheet discussions, a 50 basis point rate hike should also be discussed as an option. The Fed will meet on May 2-3 to set the interest rate and discuss the balance sheet.
