Towards a Fed rate hike in March

The US economy added fewer jobs than expected in December, but the overall figures reflected a near-full employment situation with increasing wage pressures. The main elements of the December job report are summarised in this News, sent on Friday.

This morning we learnt that Goldman Sachs now expects 4 rate hikes from the Fed in 2022. This is already almost the scenario of the market, which expects a 25bp increase in the Fed funds rate in March, then in June, November and almost another one in January 2023.

Long rates continued to rise. The 10 year has passed its 2021 high, and is now approaching 1.8%. The key question is whether this movement will continue or quickly fizzle out as it has always done in recent years for whatever reason: slowing activity or a stall in the equity market (as in 2018).

This week, there is no shortage of reasons for rates to continue to rise with the December inflation figures in the US (expected at 7%) after they reached 5% in the eurozone. Lots of speeches from central bankers too and key US activity figures in December.