Market in for shock rate hikes in 2022 as Fed set to speed up tapering

<p>The Consumer Price Index (CPI) is now at 6.8% year over year, the highest it’s been since 1982, but the markets didn’t react in a way many predicted.</p> <p>Thirty Capital Analyst Bryan Kern puts this down to the fact that there is so much liquidity in the market.</p> <p>“The Fed currently holds $5.5 trillion in US government securities,” Bryan explains. “Once they start de-leveraging that balance sheet . . . when that actually happens, we expect the Treasury market to act in a more normal fashion.”</p> <p>For commercial real estate investors, steady rates are a relief. However, they could be short-lived. Early rate hikes are on the horizon for next year, when the Fed begins to speed up its tapering, with completion anticipated in March, 2022.</p> <p>This Wednesday, the Fed is expected to make an announcement on doubling the pace of tapering, signaling that it will increase interest rates.</p> <h1>Will there be rate volatility before the end of the year?</h1> <p>Bryan and Thirty Capital CEO Rob Finlay discuss what could possibly cause volatility before the end of the year. Bryan speculates not much, while Rob observes that rates appear pegged. Right now, commercial real estate borrowers are looking at around 1.35 to 1.55 on the Ten year in the final weeks of 2021.</p> <p>Thirty Capital Analyst Jay Saunders says that any shocks before year-end will be shocks to the lower side. If rates do go down, it will be due to a geopolitical issue or something related to COVID.</p> <p>“The only thing that will drive rates up will be if the Fed comes out more hawkish than everyone expects,” says Jay.</p> <h1>Global concern about inflation</h1> <p>Central banks around the world are all holding meetings this week to discuss interest rates in their respective countries, and there will be decisions across the globe on rates. The outcomes will definitely impact rates in the US.</p> <h1>Short-term rates holding steady</h1> <p>Short-term rates are holding steady, with LIBOR ticking up slightly. Term SOFR is at 5.3, while BSBY is a