evolutionroulette| The possibility of the Federal Reserve raising interest rates within one year rises to 20%! Investors are no longer "determined"

What I saw on Wall Street

Analyze and point outEvolutionrouletteOnce the core inflation rate returns above 3%, the possibility of raising interest rates will increase, and the market is generally expected to release core PCE of 2% in March compared with the same period last year.Evolutionroulette.7%.

With US bond yields soaring and the S & P 500 down for six days in a row, the Fed will raise interest rates again this year?

As US economic data continued to be strong and Fed officials made hawkish remarks, investors began betting that the Fed might raise interest rates again, a prospect once considered unthinkable, according to media reports on Tuesday.

Analysts point out that investors' expectations of another Fed rate hike continue to rise, and the options market now shows a 20% chance of an interest rate hike in the United States over the next 12 months, up sharply from the beginning of the year.

Ed Al-Hussainy, interest rate strategist at Columbia Threadneedle, points out that option pricing reflects a 20 per cent chance of raising interest rates this year. An analysis by Benson Durham, global head of policy and asset allocation at Piper Sandler, shows a close to 25 per cent chance of interest rates rising over the next 12 months, compared with 29 per cent for Barclays options data.

This shift in expectations has produced for the bond marketEvolutionrouletteAs a result of the shock, the yield on interest-sensitive two-year Treasuries climbed to 5.Evolutionroulette.01% reached a five-month high, while u.s. stocks experienced their longest losing streak in 18 months before Monday's rally.

The next step is to cut or raise interest rates.

With US inflation exceeding expectations for three months in a row, investors in the options market are seriously considering the possibility of the Fed raising interest rates. Former US Treasury Secretary Summers said the continued inflationary pressures shown by the latest data suggest that the Fed's next policy action is likely to be to raise interest rates rather than cut them. Summers thinks there is a 15% chance that the fed will raise interest rates in its next move.

Richard Clarida, economic adviser to Pimco and former vice chairman of the Federal Reserve, pointed out:

If the data continue to disappoint, I think the Fed will have to reconsider raising interest rates. Although raising interest rates is not his basic case, once core inflation returns above 3 per cent, it will be more likely to raise interest rates.

It is now widely expected that the Fed's favorite indicator of inflation, the core PCE index, could reach 2.7 per cent in March. In response, Greg Peters, co-chief investment officer of PGIM, said:

Considering that the rate hike is perfectly reasonable, I am more optimistic about market pricing than at the beginning of the year, when interest rates would be cut only in extreme cases.

New York Fed President Williams has previously pointed out that the current economic situation means there is no need to cut interest rates. At the same time, he added, "if the data show that we need higher interest rates to meet our targets, then we will obviously consider this move".

In addition, while the market is using options to hedge or profit from raising interest rates, there is still the possibility of a rapid rate cut. Interest rate cuts remain the basic scenario, and traders expect one or two 25 basis point cuts this year, according to futures market pricing, down from six to seven in January.

Risk reminder and exemption clause

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