US Federal Reserve

Following The Fed's 3rd rate hike in 11 years, the PBOC decided, unexpectedly, to follow in the Fed's footsteps, and tighten conditions by raising the interest rates on its open-market operations, the 7-, 14-, and 28-day reverse-repos, by 10bps each, to 2.45%, 2.6% and 2.75% respectively.

That followed an increase of 10 basis points at the beginning of February, which in turn was the first increase in the 28-day contracts since 2015 and since 2013 for the other two tenors.

For those curious what the Fed's latest dot plot reveals, here is the summary:

• Median target for end-2017 is 1.375%, unchanged
• Median target for end-2018 is 2.125%, unchanged;
• Median target for end-2019 is 3% vs 2.875% in December;
• Long-run target is 3%, unchanged 

This suggests that at least as of now, the Fed sees no need to move its rate hike forecasts materially higher. As a reminder, the medians increased in December after most declined in previous three quarters.

While it is now virtually assured (odds are 95% according to the CME) that the Fed will announce a 25 bps rate hike today following an unprecedented attempt to reprice the Fed Funds market over the past month by Fed speakers - recall that as recently as three weeks ago, nobody expected a March move by the FOMC - what traders and analysts will be focused on today are hints for the future of the Fed's rate hike moves.

Well, it’s probably a stretch to say the next installment in the Fed’s tightening cycle is finally here. After all, as Bloomberg's Richard Breslow, a former FX trader and fund manager, notes, it was only a couple of weeks ago that this foregone conclusion wasn’t even on the market’s radar.

The abrupt about-face was jarring and out of character in its timing, but I like the lack of overbearing hand-holding.

Via Mark St.Cyr,

As we sit here waiting to see whether the Federal Reserve does, or does not, raise interest rates; one thing is becoming clearer: This time – it’s different.

Say what you will for all the prior calm that the “markets” seem to be expressing, or argue as so many next-in-rotation fund managers scrambling to any open microphone or camera to explain their reasoning that the “markets” have “priced in” any such policy changes.