Expectations for a 50 basis point rate hike from the Fed are rising

Omar Slim, Portfolio Manager at PineBridge Investments in Singapore, agrees with billionaire investor Bill Ackman on the Fed. Slim said the Fed is lagging behind the yield curve in fighting inflation and may need to raise rates by 50 basis points in March. Slim said the Fed's long-standing rhetoric that inflation is temporary has weakened their credibility. A 50 basis point hike in March is on the table because they are behind the curve. Recently, investors have been discussing how fast the Fed will raise interest rates in response to rising inflation. Four interest rate hikes of 25 basis points each are priced in the swap market this year. The first rate hike is expected in March. The speculation that Fed tightening is approaching is also causing a rise in US bond yields. The yield on the 2-year bond rose 9 basis points to 1.06% today, surpassing 1% for the first time since January 2020. The 10-year bond's yield increased by 7 basis points to 1.85 percent. Fed Vice Chairman Lael Brainard said last week that the Fed may raise rates by March to contain price pressures. San Francisco Fed President Mary Daly and Philadelphia Fed President Patrick Harker made similar statements. Slim told Bloomberg television that Fed officials are trying to prepare the market for a faster rate hike path. Slim also predicted that if the Fed raises interest rates by 50 basis points, the US 10-year rates will rise to the 2-2.25% range. Billionaire investor Bill Ackman also argued that the Fed had lost its fight against inflation and needed to raise interest rates more than expected in March to restore its credibility.