Key Words: Here’s what Bill Ackman says Powell should tell traders about Fed rate-hike plans

by | Jul 26, 2022 | Stock Market

“‘Tomorrow, Powell is likely to be asked: “Market pricing implies that the terminal FF rate will peak at 3.4% in 12/22 immediately declining thereafter to 2.7% by YE ‘23. What factors would cause the @federalreserve to immediately lower rates after just raising them?”

— Bill Ackman, founder and CEO, Pershing Square Capital Management

That’s billionaire hedge-fund manager Bill Ackman sounding off on Twitter with some advice for Federal Reserve Chairman Jerome Powell. Ackman argued the Fed chief should take an opportunity Wednesday to disabuse fed-funds futures traders of the notion that policy makers will move next year to quickly undo this year’s series of aggressive interest rate increases. See: Four things you will want to listen for at Wednesday’s Federal Reserve meeting

Traders have penciled in a 75% likelihood the Fed will lift the fed-funds rate by another 75 basis points, or three-quarters of a percentage point, to 2.25%-2.5% when it concludes a two-day policy meeting Wednesday afternoon, with a 25% chance of a 100 basis point move. As Ackman noted, traders see the fed-funds rate peaking — or reaching a “terminal rate” — around 3.4% by year-end and then easing next year. Also read: How high will the Fed have to push up interest rates to cool do …

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