Rate hikes are built in

The current Fed Target Rate is 1%,

the minutes released overnight hint at 2 rate hikes of 0.5% each in the next consecutive meetings,

the chart below is the U.S. 1 year Treasury Note,

it’s already at 2%,

2 more rate hikes bring the Fed Rate up to 2%,

See how the markets factor in the future………?

My call remains intact, the Fed hikes 3 times and could possibly cut once within 9-18 months.

When you couple hawkish Fed speak with talk amongst the population of recession and slowdowns will, by design, also help simmer inflation.

It’s even more simple…..western central banks can’t hike rates too much because they would derail the great overvalued, leveraged home ownership trade.

While the public financial markets correct and adjust, it’s not as great of consequence compared to central bank policy affecting the retention of your job and being able to service mortgage repayments adequately,

The uncrowded trade is to see inflation peak and abate and same goes for government bond yields.

May 26, 2022

by Rob Zdravevski

rob@karriasset.com.au

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