The next bond market selloff is no more than another bad inflation report away
Despite an inflation rate in excess of 8%, futures show traders are betting the target federal funds rate won’t rise much beyond 3% from the current range of 1.50% to 1.75%.
Powell said that by the end of the year, the Fed’s policy rate “will be pretty close to where some of the Taylor Rule iterations are.”
That’s 4.93% based on current estimates, or more than 3 percentage points above the current fed funds rate.
So, while traders rush to hedge for a recession that has yet to arrive, they forget that the fight against inflation is far from over.
Jenny Paris Bloomberg 24 juni 2022
Jenny Paris is executive editor at Bloomberg News for global bond, currency and emerging markets. She has previously worked at the Wall Street Journal and Dow Jones Newswires covering the euro zone crisis and as a managing editor for Asia equity markets
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