Will Fed Chair Powell increase the Fed Funds Rate for three consecutive meetings? We say look to the credit markets.

Consensus amongst investors seems to be that the Fed will execute two consecutive rate hikes but may pause before executing a third. Our view is that Fed Chair Powell will execute Fed Funds hikes at three or more consecutive FOMC meetings so long as the credit markets are operating smoothly. One useful indicator to this end is to review High Yield spreads which at the moment are not indicative of a malfunctioning credit market (see graphic below). We of course expect the CPI figure to be released later this week to remain robust.

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