Is the US FED going to hike its Fed rate by 50bp or 75bp in June 2022?

Let's do our standard analysis to forecast the upcoming rate hike.

The Fedwatch tool is showing a 71.6% probability of a 50bp rate hike and a 28.4% probability of a 75bp rate hike for June.

Let's use the 3 FED rates analysis to determine the rate hike.

IORB: 0.9% vs 0.4% in May

Although the IORB (0.9%) is still within the current fed rate range of 0.75-1%, it has jumped by more than 2x in May compared to the last fed meeting.

EFFR: 0.83% vs 0.33% in May

Although the EFFR (0.83%) is still within the current fed rate range of 0.75-1%, it has jumped by more than 2x in May compared to the last fed meeting.

On RRP: 0.8% vs 0.3% in May (Fed is paying.)

On RP: No transaction at 1% vs 0.5% in March. (Fed is receiving.)

EFFR: 0.83%

IORB: 0.9%

When the EFFR (0.83%) is lesser than IORB (0.9%), it means that the US is still under the monetary easing condition.  The high cash of US$2.16T deposited with the US FED also shows that there is excess liquidity and the banks have nowhere to invest in other profitable investments.  Thus, we do not see any stress in the US financial system and the US FED will hike 50bp in June 2022 as stated because the Fed rates have increased by more than 2x since the last meeting.