With Inflation Running In The Highest Pace In 30 Years, Traders Are Betting on 3 Hike In 2022

Federal Reserve officials at their meeting earlier this month expressed concern about inflation and said they would be willing to raise interest rates if prices keep rising.

The committee that sets interest rates for the Fed on Wednesday released the minutes from the November session where it first signaled that it could be dialing back all the economic help it’s been providing during the pandemic.

The meeting summary indicates a lively discussion about inflation, with members stressing the willingness to act if conditions continue to heat up.

“Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the Committee’s objectives,” the minutes stated.

Markets, though, are anticipating a more aggressive Fed.

Traders in contracts that bet on the future of short-term rates are indicating the Fed will raise its benchmark rate three times in 2022 in25 basis point intervals, though current official projections are for no more than one hike next year. However, those markets are volatile and can change quickly depending on the signals the Fed sends.

FOMC members expressed concern at the meeting that the continued high inflation readings could influence public perception and “expectations were becoming less well anchored” to the Fed’s 2% longer-run target.

source: CNBC