Bank of America, Goldman Sachs, JPMorgan and UBS have announced their forecasts for another US Federal Reserve rate hike. Bank of America and Goldman Sachs, for example, now expect the Fed to hike rates three more times this year.
Big banks predict more Fed rate hikes
As the Federal Reserve continues its fight against inflation, several major banks – including Bank of America, Goldman Sachs, UBS and JPMorgan – have shared their forecasts of how much more the Fed will hike rates this year.
Goldman Sachs said in a note on Thursday it now expects the Federal Reserve to hike interest rates three more times this year after data released on Thursday pointed to persistent inflation and a resilient job market. The bank, which previously forecast rate hikes of 25 basis points at the Fed’s March and May meetings, now expects another rate hike in June. The firm’s economists, led by Jan Hatzius, Head of Global Investment Research and Chief Economist, detailed:
On the back of stronger growth and firmer inflation news, we’re adding a 25 basis point (bps) rate hike to our June Fed forecast, which translates to a top rate of 5.25% to 5.5%.
Bank of America Global Research also expects three more rate hikes from the Federal Reserve this year. The bank previously said it expects the Fed to hike rates by 25 basis points at both its March and May meetings. Bank of America now expects another 25 basis point rate hike at the Fed’s June meeting, which will lift the final rate to a range of 5.25% to 5.5%. The bank said in a note to clients this week:
Resurgent inflation and solid employment gains mean the risks to this (just two rate hikes) outlook are too lopsided for our liking.
European investment bank UBS also said it expects the Federal Reserve to hike interest rates by 25 basis points at its March and May meetings, which could keep the Fed’s policy rate in the 5% to 5.25% range. While most people don’t expect the Fed to cut rates this year, UBS does expect the Federal Reserve to ease rates at its September meeting. The global investment bank recently wrote in a client note:
We expect the FOMC (Federal Open Market Committee) to reverse and start cutting interest rates at the September FOMC meeting.
Meanwhile, JPMorgan Chase had forecast the terminal rate at 5.1% by the end of June. Jamie Dimon, CEO of JPMorgan, said in an interview with Portal last week that the Federal Reserve could hike interest rates above the 5% mark. Stressing that it is too early to announce victory over inflation, Dimon said:
It’s perfectly reasonable for the Fed to go to 5% and wait a while.
However, if inflation falls to 3.5% or 4% and stays there, “you may need to go above 5% and that could impact short and longer rates,” JPMorgan’s board of directors warned.
Federal Reserve Chair Jerome Powell and several other Fed officials have said more rate hikes are needed to curb inflation. A Portal poll released on Tuesday showed that 46 out of 86 economists have predicted the Federal Reserve will hike interest rates by 25 basis points in both March and May.
Do you agree with Bank of America, Goldman Sachs, UBS or JPMorgan that the Fed will keep raising rates? Let us know in the comment section below.
Kevin Helms
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