The FOMC meeting minutes provided additional information about the Committee's decision to hike rates by 25 bps in February. Economists at TD Securities look for a 5.25% terminal rate at the May meeting.

Fed is likely to keep policy restrictive for longer

“The minutes signaled that the FOMC is not done yet in terms of further rate hikes, and it is looking to maintain a restrictive policy stance for the foreseeable future.”

“We expect 25 bps rate hikes in March and May, with the Fed settling on a terminal Fed funds target rate range of 5.00%-5.25% by May. However, we do note a sizable upside risk to our terminal rate projection, where strength in upcoming releases on CPI and PCE inflation, as well as the labor market, could very well sway Fed to continue to hike beyond the May meeting.”

“We continue to like owning 10y Treasuries as the Fed is likely to keep policy restrictive for longer, resulting in weak growth later this year and in 2024.”