How Much Rate Hiking Does QT2 Equal?

Check out the accompanying pdf and chart collection. Executive Summary: The Fed may have 100bps less of rate hiking to do thanks to the tightening effects of the strong dollar and QT2, the Fed’s balance-sheet-reduction plan. That means the Fed may be done raising the federal funds rate in September after just two more 75bps increases to 3.00%. … Indeed, the Treasury market appears to be discounting a 3.00% peak, sooner rather than later. … The mortgage market in particular must be discounting QT2, as the Fed’s rate hiking alone can’t account for how high mortgage rates have soared, depressing housing and weakening the economy.