Hike slowdown coming: Market still expecting 50bps for October, but slowing to 25bps in Nov and Dec

[jesuslover07]

Interbank futures implied rates have dropped this morning, presumably due to the UK announcing changes to its tax cut plans overnight.

• Market-implied terminal rate* is 4.06%
• Expected Oct rate hike is 43bps, equal to a 74% chance of 50bps and a 26% chance of 25bps.
• Expected Nov rate hike is 31bps, equal to a 75% chance of 25bps and a 25% chance of 50bps.
• Expected Dec rate hike is 22bps, equal to an 87% chance of 25bps and a 13% chance of no hike at all.

*(included in this chart is the terminal rate according to overnight-indexed swaps, but Sep pricing data for that market is not yet publicly available. Should be in the next few days).

 

[the_morrighan]

@jesuslover07 7 months ago they forecasted no rate hikes. They’ll hike until something breaks.

 

[jesuslover07]

@the_morrighan And 7 months ago the market forecast I am citing disagreed with him and said there would be rate hikes.

The numbers in the OP are from that same market that people pointed to at the time to show Lowe was wrong.

 

[the_morrighan]

@jesuslover07 Economy, business, jobs and house prices already in trouble by Christmas based on those numbers. Too much debt everywhere.

 

[resjudicata]

@the_morrighan Username checks out

 

[bip]

@jesuslover07 I swear they've been saying this since May.

'Big hike this month, but next month will be less'.

 

[jjddww]

@bip The bulls repeat it ad nauseum.

At first, inflation wouldn't be a problem.

Then inflation was warmer but should be kept higher until rates rise in 2024 because the last few years was slightly below target band.

Then it became inflation is doing badly, we'll need 2-3 rate rises this year and it'll be sweet

Then it was "inflation has peaked" and the "market pricing is wrong" every month for the last 6 months.

Now, it is "inflation is bad, but a recession is worse, please bro please stop hiking".

Here is an absolutely hilarious article that reeks of hopium, with quotes from the CBA CEO from May this year.

“The speculation about a cash rate the market is pricing in is, in our view, much higher than what is going to unfold,”... The bond market expects the cash rate to hit 2.5 per cent by end of this calendar year and to go past 3 per cent next year. A 2.5 per cent cash rate would add around $9400 to repayments each year on a $600,000 loan. CBA expects the cash rate to hit 1.35 per cent by the end of year and “normalise” at a level of 1.60 per cent mid-way through next year – around half the level bond markets are predicting.

https://www.afr.com/companies/finan...-pressure-on-interest-margins-20220512-p5aklc

 

[truthfrees]

@jjddww Just stick your head in the sand, ignore all facts and figures that don't align with your view of the world and you too can be a bull!

Global economic conditions are terrible and anyone ignoring this is in for a world of pain.

 

[blemishedsoul]

@jjddww In my opinion, rates won't stop rising until the data shows that society is cutting back. If people believe this is just going to be a 'transitory' hiking phase and then things will go back to normal, they won't curb the actions that are needed to curb inflation.

 

[kate22]

@blemishedsoul I spend a bit of time on Twitter and ever since J Powell started lifting rates the sentiment has been that there *has to* be a pivot. Today the market is running because people are anticipating said pivot; that's what I think anyway. UK pivoted and therefore, so will US and everyone else. Party times back in play.

It's still way too soon. People haven't become demoralised enough.

 

[tourist49]

@jjddww To be fair we’ve heard bear bullshit for a decade. To imply this is unique to bulls is silly…

 

[letmylightshine]

@bip They were right last month.

 

[theobvioushero]

@bip I haven't heard this narrative once. I've been consistently hearing "The beatings rate rises will continue until moral improves inflation is reigned in."

 

[beatye]

@bip I’ve actually been saying big hikes until Christmas period where they give people reprieve. Then after Christmas they say “inflation is still lingering, back to more rate hikes”.

Where I could go wrong, is that we crash before Christmas. Otherwise I think I’m on the money.

 

[morgan772]

@beatye Place your bets, market is open!

 

[meepmeeprr]

@jesuslover07 Economy comes first. Hit hard and fix it quickly

 

[orangewolf]

@meepmeeprr Agree. It will be interesting what RBA do next meeting though as they are meeting in a day before Fed next meeting but i think only sensubke thing is do raise .50 this month and next

 

[freeforthetaking]

@orangewolf The only sensible thing to do is remove Lowe and the entire board and replace with competent people.

 

[laurencesantos]

@meepmeeprr But what about my propatees

 

[blemishedsoul]

@jesuslover07 Inflation is transitory, rates won't go up til 2024 etc. etc.