Zero Hedge declares “odds earlier today hit 100% of a 50bps rate hike before easing modestly (and more than 6 hikes for all of 2022.)” Every Banker on Wall Street is glued to their market monitors to see if they’ll be jumping. They’re obsessed with the upcoming Federal Open Market Committee meeting for March.
Emergency rate raise
The reason investors are all in panic mode comes from another, connected, crisis. The “real action” insiders point out, “is in the February Fed funds contract.”
That has bankers lining the ledges because it spiked by a full 13 basis points. Those numbers hint at “5bps of tightening relative to the effective Fed funds rate of 0.08%.”
It may not matter much to Joe Average but the contract expires on February 28. Money managers are freaking out because that’s “more than two weeks before the March 16 FOMC decision.”
It scares the bejeebes out of them since it also “means that someone is preparing for an inter-meeting rate hike, some time before March.”
Their fancy pocket computers are all crunching things the same way. When they plug in the data, the machines keep giving the same answer.
“The 13bps in the February contract means that there is now a 30% chance of an emergency rate hike.”
Friday or Monday
On Thursday, February 10, market analyst Tim Duy with SGH Macro opined that he would “not be surprised by an inter-meeting move either tomorrow Friday or by Monday. I know, this is crazy aggressive.” A rate hike now is certainly aggressive.
It also strikes a lot of the bean counters as crazy. After all, “the Fed is still buying bonds as part of its ongoing QE which is expected to conclude in late February/early March.” Ahhh, that infamous “Quantitative Easing,” cooked up in the labs on Jekyll Island.
The moneychangers are all trying to explain to their clients “we may soon face the monetary paradox of the Fed hiking rates even as the Fed is still easing monetary policy through QE.” Any mathematician will tell you that this practice of twisting the knobs on a clearly “tent-map” rate ratio can only cause “chaos.”
As Zero Hedge explains, “the biggest joke here” is that “the Fed would be tightening conditions to contain inflation that is almost entirely supply-driven and which the Fed has no control over.” The feds seem to be having a similar problem with the supply driven by truckers, too.
This isn’t the only sign that those who steer the juggernaut called the Federal Reserve are willing to do insane things to please the administration. The Fed “has done crazier things – like backstopping the entire corporate bond market and effectively nationalizing it during the peak of the covid crisis.”
They note that their crystal ball doesn’t always get clear reception, so “while we don’t know if the 30% odds of an emergency rate hike are accurate, be on the watch for an emergency Fed declaration tomorrow and Monday at 8:00am ET which is the Fed’s preferred time for unexpected pre-market announcements.“