Nomura expects a 50 basis point hike at the March meeting of the US Federal Reserve with five hikes overall in the year, which is 150 bps.

“The Fed, I think is gearing up for an aggressive tightening. We actually at Nomura expect a 50 basis point hike at the March meeting, even though the consensus is 25. We expect five more hikes this year so 150 basis points all up this year,” Rob Subbaraman, Head of Global Macro Research at Nomura told CNBC-TV18.

There is a consensus that the Fed will hike interest rates in March given the inflation situation. However, it may not raise it by 50 basis points. Also the minutes don't indicate the 7 rate hikes that markets were pencilling in after Fed member St. Louis Federal Reserve President James Bullard's statements.

Read Here: US inflation at peak, expect easing ahead: Bank Julius Baer

More importantly, the minutes show members want the Fed to aggressively contract its balancesheet, which has grown from 4.5 trillion pre COVID to 9 trillion in less than 2 years. Members don't just want the Fed to not buy bonds that mature.

They want Fed to sell the mortgage backed securities it has bought, so that the Fed owns only treasuries. This can mean not only will global interest rates rise but global liquidity will also contract significantly.

For full interview, watch accompanying video.

Also Read: Asian stocks rise as bond yields ease on dovish Federal Reserve minutes

First Published:Feb 17, 2022 12:46 PM IST