Below is a chart and brief excerpt from today's Early Look written by Director of Research Daryl Jones.
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On that last point, the expectation for hikes in interest rates for 2022 according to Fed Funds Futures has hit a new cycle high this morning. As the Chart of the Day shows, the expectation for interest rate hikes this year is now at seven. Seven! Should that happen, that's a seriously different monetary environment than we've been in for the previous two years. Meanwhile the 10 and 2-year OIS 1-year forward spread is currently at -0.14, which implies an inverted yield curve in a year from now. This is a new cycle low. So... with the expectation of short-term rates increasing, further out on the curve the expectation is that they will fall. One interpretation of this is that future growth and inflation may decelerate meaningfully. |
