The Federal Open Market Committee is considering a 50-basis-point rate hike mid-June. Wayne Winegarden discusses the likelihood of elevated inflation persisting through the end of 2022:
“Assuming the fiscal pressures subside, it will likely take until the late third quarter to start feeling some relief,” Winegarden said.
“I think the [mortgage-backed securities] sales will become difficult politically as the housing market weakens and the Fed will not want to further stress this market,” Winegarden said, referring to the risk that rising mortgage rates will create affordability problems for some buyers, further slowing the housing market.
“Since the inflationary pressures will still be strong, this will likely lead to continued quantitative tightening, but at a slower pace than the Fed is currently planning,” he said.