Sees rate increases as early as March

The President and CEO of the Federal Reserve Bank of San Francisco Mary Daly has stated that the Fed does not want to get too far ahead on calling a number of rate increases.

She explained that they definitely see rate increases as early as March because inflation is uncomfortably high.

She explained that it is time to start removing some accommodation and that she sees prices moderating as supply imbalances ease.

Market implications

Fed speakers will enter blackout on communications this weekend and the markets are already expecting a rate increase as soon as the end of this quarter. The Fed has guided that rates can start to go up as soon as March.

”We agree with that assessment and expect that the Fed will hike 25bps in March (once they’ve halted further asset purchases), delivering a total of five hikes over 2022. Capping inflation is the Fed’s key priority for 2022,” analysts at ANZ Bank explained. 

Meanwhile, the US dollar, as measured by the DXY index, has moved in on a critical level of daily support and would now be expected to correct higher as follows:

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