17.01.202207:10 Forex Analysis & Reviews: JPMorgan CEO projects up to seven rate hikes in 2022

Major US stock indices continue trading as part of a new correction round, while drifting near their all-time highs. Thus, it is still impossible to say that stock indices are trading under pressure. The fundamental environment is getting worse for risky assets day by day, so the stock market is expected to enter a strong correction rather than a 1-2% correction. However, it is worth noting that all pressure factors can be seen as potential. Market participants are confident that the Fed will taper its QE program in the near future and start raising interest rates in March, and there will be three or four rate hikes in 2022. In addition, the regulator may begin unwinding its own balance sheet. As for the foreign exchange market, it can be assumed that some or all of these factors could be priced in the US dollar rate. The same cannot be said of the stock market, because all the leading indices continue to trade at the levels they were located before. Accordingly, market participants have not yet responded to future possible changes. So far, the Fed has just reduced the QE program by $45 billion. In fact, this means that the central bank continues to inject money into the US economy, but at a slower pace. Apparently, it is this factor preventing key stock indices from falling. However, when March comes, the market will most likely enter a deep correction.

In recent months, there has been a lot of talk about the Fed and its measures to soften the blow from surging inflation. This subject has been key for all markets. At the same time, there are also market participants who make their own assumptions about future changes. For instance, we have already said that an interest rate hike may not lead to a return of inflation to its 2% target. The rate may well remain at a high level for the next few years or as long as the pandemic continues. JPMorgan Chase Chief Executive Jamie Dimon said on Friday that rising inflation could prompt the Federal Reserve to raise its key interest rate as many as six or seven times. However, he did not specify the period of time this would happen, probably in 2022. Notably, the market expects three or four rate hikes this year, as well as six hikes over the next two years. Therefore, Jamie Dimon's prediction is very bold. However, if inflation does not ease, the Fed will have to take tougher measures to get it under control.