With US inflation data ahead this week, as well as testimony from top Fed officials, it could be just the beginning of a bigger repricing. “It’s quite possible that the Fed is forced to be more aggressive in this cycle,” said Lou Crandall, chief economist at Wrightson ICAP LLC. While three-to-four hikes for 2022 is priced in on average, some in the market are betting on less tightening and others more. Option traders are flagging the prospect of eight quarter-point rate moves by early 2024, up from earlier expectations of around six. Should Fed officials this week decline to walk back the recent message about tackling inflation pressures, that tightening momentum in options could extend.
