The last 14 Fed meetings have been anticlimactic. The Fed came, they saw, they tightened and told us to expect more of the same. Looking ahead, things are starting to get more interesting. The outlook for economy now is less certain.
We expect the Fed to focus on the risks to higher inflation caused by higher energy prices, supply-chain disruptions and the strain on resources resulting from the massive rescue, relief and rebuilding effort now underway.
We expect the combination of solid economic growth and higher inflation risks to push the Fed to raise rates higher than is implied by prevailing bond yields.