How high can the fed go? Make your guess

Investing and Markets 📈
1

Fed funds interest rate: how far can they go?

I say 2.5% before the world economy teeters on full on depression. Then back 0% and printing.

They don’t want to see EM join China Yuan over time.

What’s your predicted interest rate?

Volker coming?

2 Likes
2

China itself didn’t want to be a major reserve currency since making the yuan freely tradeable would force them to give up exchange rate control and likely increase the value of the yuan significantly (Impossible trinity - Wikipedia )

The US wants the dollar to be high and in demand, China still wants the yuan to be low(er) and not in demand.

No idea about the US rate, 2.5% seems high though.

2 Likes
3

From the bit I’ve read before, 2-2.5% was the range the Fed felt was “neutral”, where they wouldn’t have neither a negative or positive impact on the US economy.

So it might be in the right ballpark somewhere in the not too distant future, especially with the rate increase they’re considering in May

1 Like
4

I agree 2.5% seems high but I think domestic Inflation is a huge pressure.

Edit: to add, it sounds like China wants to have its cake and eat it.

1 Like
5

There are signs that US domestic inflation might be peaking, all the while the stock market stays where it is the fed will still feel okay with raising rates. Peaking doesn’t mean dropping so that’s the big number I’ll keeping an eye on.

US savings are dropping as those who haven’t been working are spending through their own savings after using the stimulus checks. Inflation on speeds this up.

6

I don’t see a guess in there.

7

You don’t really need to ask individuals to guess, the market consensus is baked into the US treasury bills/notes prices - you can calculate all the implied rate hikes by comparing different durations.

The fact that the US2Y is already paying 2.6% now suggests that 2.5% is quite a bit lower than the average estimate. The US6M at 1.36% suggests the vast majority of those hikes will be happening quite soon.

4 Likes
8

That’s the point of the thread lol. As I understand we see a sum of market bets, no?

9

2.75%

10

Decent chance they raise the rate and force a recession imo

11

Easy there nostradamus

12

I don’t think the situation will go as badly as predicted. The US are energy independent and if inflation peaks and starts to drop this summer the Feb won’t have the need to act. Maybe I’m being too positive!

1 Like
13

If I’m not mistaken the fed is still purchasing bonds.

14

I think they’ll be forced to accept an inevitable recession as it’s clear growing your way out of this inflation problem isn’t going to happen. China would be in a good position to capitalise on global stagflation but they’re locking down their country.

15

Well, they’ve raised to 0. 25% and Sri Lanka is already in default. Looking at Lebanon, Egypt and Africa next.

16

Nah I believe the Fed are planning to start reducing the balance sheet maybe next month, or fairly soon, by around $95bn a month

17

https://www.bloomberg.com/opinion/articles/2022-03-29/is-a-recession-coming-the-fed-has-made-it-inevitable

Archived - archive.ph

It’s a real possibility

18

When did they say they stopped again?

19

:joy: Yes, quite

20

It was in the minutes of their meeting a few weeks back, could be as early as next month