Fed Chair Powell hinted at a mega–rate hike. The markets are banking on more than one

With inflation and growth concerns swirling over the markets, Jerome Powell dropped a tantalizing clue on Monday about how the Federal Reserve will approach its next rate-setting meeting in May.

To have spotted the sign, you’d have to be a top-notch Fed-jargon parser.

In a speech yesterday, Powell added a new adverb—“expeditiously”—to his vocabulary about just how aggressively the central bank could hike rates this year. He also signaled being open to a 50-basis–point rate hike, all but closing the door on a 13-year stretch of loose monetary policy and rock-bottom lending rates.

Wall Street pounced on the Powell speech, with a series of new bets that the Fed will be even more hawkish than previously thought.

“Our best guess is that the shift in wording from ‘steadily’ in January to ‘expeditiously’ today is a signal that a 50bp rate hike is coming,” Goldman Sachs chief economist Jan Hatzius wrote in an investor note. “We now forecast 50bp hikes at both the May and June meetings, followed by 25bp hikes at the four remaining meetings in the back half of 2022, and three quarterly hikes in 2023 Q1–Q3.”

Add that up, and the benchmark Federal funds interest rate could move above 3% in 18 months’ time—not great news for aspiring homebuyers or people who have variable-rate mortgages.

How high will rates go?

The Fed’s aggressive ramp-up in rates is looking like nothing we’ve seen in recent years, noted Jim Reid, Deutsche Bank global head of thematic research, a sign the central bank feels it’s behind the curve in keeping inflation—running at a 40-year-high—in check.

“It’s increasingly dawning on investors that this is going to be a very different hiking cycle from its predecessor back in 2015, and yesterday Fed funds futures moved to price in more than 200bps worth of hikes for 2022 for the first time (including the 25bps we saw last week),” Reid wrote on Tuesday.

Following the Powell speech, the yield on the 10-year Treasury note jumped 14 basis points on Monday, and equities sank in afternoon trading. U.S. futures are doing a bit better on Tuesday, with the S&P up 0.4% at 5 a.m. ET.

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European bourses were in the green at the open as well, as most risk assets were rebounding. Crypto prices, for example, were gaining with Bitcoin up to $42,500, an increase of more than 3% in the past 24 hours.

Investors are taking heart that the closely watched spread between short- and long-term bonds—measured as the difference between the yield on a two-year Treasury note and that of a 10-year Treasury note—has been widening in recent weeks, a sign that Wall Street sees the chance of a recession is on the wane.

This story was originally featured on Fortune.com