Dot Plot Show Fed Anticipates More Hikes in 2023 to 4.50 Percent


by Mish Shedlock, Mish Talk:

The FOMC announcement was a big yawner, the dot plot wasn’t.

The FOMC press statement was a complete yawner. For discussion please see Fed Hikes by Three-Quarters of a Point, No Surprises.

The Fed’s Summary of Economic Projections from the meeting wasn’t.


Hikes Come Hell or High Water? 

  • The Fed participants have a median expectation of 4.25 to 4.50 percent for the end of 2022
  • That’s another 1.25 percentage points more this year.
  • The Fed then anticipates one more hike in 2023 to 4.50 to 4.75 percent.

I have to admit that a year ago I did not foresee this. But here we are.

The key question is not where we’ve been but where we are headed. I Highly doubt the Fed hikes another 1.25 percentage points this year or gets anywhere close to 4.50 to 4.75 percent in 2023.

The Fed Perpetually Chases Its Tail

Rate hikes operate with a lag, so multiple things will break at once.

Others disagree but I think it’s a given the Fed makes a rare mistake of tightening too much.

The Fed will once again chase its tail, this time from the opposite end, tightening too much, too fast.

GDPNow Forecast for 2022 Q3 Barely Positive Following Housing Starts Report

I believe a recession has already begun. Regardless, the Fed is hiking and about to double QT smack in the middle of a very weak economy.

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