December 17, 2021

Will The Fed Make A Policy Mistake?

The latest projections from the Fed have three rate hikes penciled in for 2022 and 2023, followed by another two in 2024. If the Fed raises rates in line with its forecasts, it could invert the yield curve. As seen in this chart, a recession typically follows when Fed tightening leads to an inverted curve.

Is the Fed heading towards a policy mistake? Will the Fed be forced to dial down the hawkishness? And what will it mean for Treasuries and the dollar?