The Fed has recently slowed its pace of rate hikes in order to allow the central bank better to respond to incoming data. However, the economic data we received so far this year has been stronger than expected. Growth is rebounding, the labour market remains exceptionally strong and inflation is not coming down as quickly as initially thought.

The Fed is data dependent and the economic data we’ve received so far this year won’t help them to stop hiking. I believe the terminal rate will have to be revised higher and it will likely end up being closer to 6% than to 5%.