Multiple Fed Rate Hikes Reasonable, Pimco's Wilding Says

Pimco's Andrew Wilding, a senior figure at the bond manager, told Bloomberg that multiple Federal Reserve rate increases would be reasonable, signaling that a sustained tightening path is being considered within the investment community. The transmission mechanism runs primarily through the rate differential channel: expectations of higher policy rates widen yield spreads between US Treasuries and major foreign sovereign bonds, drawing capital toward dollar-denominated assets and lifting the currency. The dollar, and to a lesser extent short-dated Treasury yields and US money market instruments, are the most directly exposed, since their pricing is most sensitive to shifts in the expected path of the fed funds rate. Currencies with lower carry or weaker domestic rate expectations face the greatest relative pressure in such a repricing. Traders should watch the next Consumer Price Index release and the Fed's updated dot plot, as either would clarify whether inflation data supports the multi-hike scenario Wilding described.

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