J.P. Morgan':
- We are now replacing our expectations for 25bp hikes in May and June with 50bp moves
- reverting to 25bp hikes in July and thereafter
JPM project the 'terminal' funds rate just below3% in 2023.
JPM reasoning is "Powell's latest pivot":
- The median dot from the March 16th dot plot showed the equivalent of seven 25bp hikes this year.
- Speaking on March 21st Chair Powell said "each [dot plot] reflects a point in time and can become outdated quickly at times like these." To prove his point, he followed this up with "if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so."
- This sentiment was soon echoed by a chorus of Fed officials, including some traditional doves.
- It's hard to see what happened between March 16th and March 21st to motivate this change, certainly not economic data, and it's unlikely there were enough surprises on the geopolitical front. Perhaps the market's nonchalant response to the somewhat hawkish outcome of the FOMC meeting gave the Committee the opening to signal a faster tightening pace.
