BofA holds firm on two more Fed hikes before year-end
“The robustness of the nominal economy both increases the risks of inflation persistence and reduces the risks that hikes will cause a recession,” he wrote.
It is a view consistent with the directional shift mortgage professionals have been tracking for months. Mortgage Bankers Association’s chief economist Mike Fratantoni, senior vice president at the MBA, identified the Fed’s posture shift early.
After a July FOMC vote in which three members dissented in favor of hiking immediately, Fratantoni said: “The three dissents at this meeting, with each of these dissenting members preferring to hike rates now, indicates that the Fed is likely moving into a hiking cycle soon.”
Warsh’s credibility play and what it means for the market
Bhave also pointed to a political dimension in Fed Chair Kevin Warsh’s calculus. Three consecutive hikes would cement Warsh’s reputation as an independent operator, insulating him from White House pressure and positioning him to claim credit for any cooling that follows.
“For one, the rate hike alleviates concerns that Warsh is not politically independent,” Bhave wrote.
