Fed Unfiltered, Weekly Report: Monday Morning Reset (12/5/22)

FOMC – 50bps Hike in Dec, with a Possibility of 25bps

• With Powell’s comments on Wednesday (“makes sense to moderate our pace of rate increases”), followed on Thursday by Williams (“taking a step down in that pace”), 50bps is the most likely outcome for December’s meeting.
  • Although, if the 2-year Treasury is a good measure of policy expectations, as both Powell and Bullard mentioned back in May, then a 25bps hike could be most likely in December.
  • 12/2/22 –2yr was 4.28%; Fed Funds was 4.00%.
• Once the December rate hike question is settled, the next two questions will be:
  • Where is the sufficiently restrictive stance or the end point for this rate hike cycle?
  • How long will rates be held at the restrictive level?  (See Fed commentary below.)