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

FOMC – 50bps Most Likely, with a Possibility of 25bps

• The FOMC meets this week with an announcement Wed at 11am (PST) – because seven Fed officials have talked about a step down from the 75bps rate hike level – a 50bps rate hike is widely expected.
• A 25bps hike could also be on the table – the three recent times the Fed raised rates above the 2-year Treasury (2000, 2006, 2019), a recession followed – although the Fed is very reluctant to surprise to the upside, they have no qualms about surprising to the downside (a smaller hike than the market expects).
  • 12/9/22 –2yr was 4.33%; Fed Funds was 4.00%.