Fannie Mae’s economists have again stepped up their expectations for the Fed’s response to escalating inflation. A 7.5 percent annual increase in the January Consumer Price Index (CPI), a 40-year high, prompted Fannie’s Economic & Strategic Research (ESR) Group to raise its forecast for a March increase in the Fed funds rate from 25 basis points to 50. The group says, however, that they disagree with the futures markets in that they expect initial rate hikes, from March through July to total 100 basis points, followed by a pause for the rest of the year while the Fed assesses the impact of both the increases and their balance
sheet run off, especially as the Fed has had little experience with the latter.
sheet run off, especially as the Fed has had little experience with the latter.