Peter Boockvar: Fed needs to slow pace of interest rate hike

on Sep 24, 2022
  • Bleakley's Peter Boockvar warns Fed against an interest rate hike
  • The near-term peak of the dollar likely because of fed moves
  • Boockvar warns that rate hikes could cause dislocations

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Bleakley Advisory Group’s CIO Peter Boockvar told CNBC’s “Squawk Box” on Friday that the Fed should slow down on interest hikes. Peter termed the Fed’s moves aggressive, followed by various central banks after years of suppressed interest rates.

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The near-term peak of the dollar likely because of fed moves

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According to Peter, acute short-term movements can make the dollar peak. In the next couple of quarters, bond yields will continue rising even after the sharp surges witnessed in the wake of the aggressive Fed moves and from other central banks globally.

He explained that the market is witnessing a general unwind of more than a decade of artificially suppressed interest rates. Although the recent hikes in bond yields have been acute, Peter contends they will mark a near-term peak. He, however, indicated that the figures are still below the inflation rate, which indicates the potential for an upside.

The remarks from Boockvar came after a declaration at the start of the week that the Federal Reserve was increasing its benchmark rate by 75 basis points, (as reported by Invezz on September 21) which will be a third consecutive hike. Meanwhile, the US central bank’s forecasts indicate that significant additional hikes are anticipated before the year is over.

According to Peter, if there are liquidity challenges in the treasury market which is expected to be the most liquid in the world, that spells doom for leveraged liquidity in the loan market, where it takes weeks to clear a bond. In addition, he explained that the requirement for banks to hold more capital creates friction to trading and lending capacity.

Boockvar: interest rate hike could cause dislocations

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Considering the sudden changes in the market, Peter states that the fed need to slow the interest rate hikes because the interest rate increase is likely to cause dislocations.

He asserted:

“I can agree with them if they want to get to 4% or 4.5%, but it’s the speed at which they’re getting there that is creating the most amount of danger right now and the most amount of disruption.”

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