March 2, 2023

The U.S. Federal Reserve is expected to increase interest rates three more times this year, according to Goldman Sachs and Bank of America, who raised their projections after data indicated persistent inflation and a robust job market.

Data show that producer prices increased in January by the largest margin in seven months, while a Labor Department report revealed that the number of Americans submitting new unemployment benefit claims surprisingly decreased last week.

According to a note published by Goldman Sachs analysts headed by Jan Hatzius, “we are adding a 25bp (basis points) rate hike in June to our Fed estimate, for a peak funds rate of 5.25%-5.5%.”

While this is going on, money markets are presently pricing in a 5.3% terminal rate by July.

BofA Global Research anticipates a 25 bps increase at the June Fed meeting, raising the terminal rate to a level of 5.25%-5.5%.

It had previously planned two rate increases of 25 basis points each for the sessions in March and May.

BofA stated in a client note that “resurgent inflation and solid job gains imply that the risks to this (only two interest rate hikes) outlook are too one-sided for our liking.”

Following the most recent U.S. data, European investment bank UBS predicted that the Fed would increase rates by 25 basis points at its meetings in March and May, potentially leaving the Fed funds rate in the 5%–5.25% range.

But in stark contrast to its American counterparts, UBS predicted that the Fed would lower interest rates at its conference in September this year.

Prior to the most recent U.S. statistics, J.P. Morgan predicted that by the end of June, the terminal rate would be 5.1%.

Before the release of the most recent statistics, the majority of economists surveyed by Reuters predicted that the Fed would increase interest rates at least twice more in the upcoming months, with the possibility of further increases. None of them anticipate a reduction in rates this year.

Source: NBC News
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.