Bank of America, Goldman Sachs, JPMorgan and UBS Share Predictions of Further Fed Rate Hikes

Bank of America, Goldman Sachs, JPMorgan and UBS shared their forecasts for the Federal Reserve’s further interest rate hike. Bank of America and Goldman Sachs, for example, now expect the Fed to raise interest rates three more times this year.

Big banks predict more Fed rate hikes

As the US Federal Reserve continues its fight against inflation, several major banks – including Bank of America, Goldman Sachs, UBS and JPMorgan – have shared their forecasts for how much more the Fed will raise interest rates this year.

Goldman Sachs said in a note Thursday that it now expects the U.S. central bank to raise interest three more times this year after data released Thursday indicated persistent inflation and a resilient labor 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 the Global Investment Research division and chief economist, detailed:

In light of stronger growth and firmer inflation news, we are adding a 25 basis point (basis point) rate hike in June to our Fed forecast, for a maximum policy rate of 5 .25% to 5.5%.

Bank of America Global Research also expects to see three more interest rate hikes from the Federal Reserve this year. The bank said earlier that it expected the Fed to raise interest rates by 25 basis points each at its March and May meetings. Bank of America now expects another 25 basis point rate hike at the June Fed meeting, which will push the terminal rate up to a range of 5.25% to 5.5%. The bank explained in a client note this week:

The resurgence of inflation and solid employment gains mean that the risks to this outlook (just two interest rate hikes) are too one-sided for our liking.

European investment bank UBS also said it expects the Federal Reserve to raise interest rates by 25 basis points at its March and May meetings, which could leave the funds rate feds in the range of 5% to 5.25%. While most people don’t expect the Fed to cut interest rates this year, UBS estimated that the US central bank will cut interest rates at its September meeting. The global investment bank recently wrote in a client note:

We expect the FOMC (Federal Open Market Committee) to turn around and start cutting interest rates at the September FOMC meeting.

Meanwhile, JPMorgan Chase has forecast the terminal rate at 5.1% by the end of June. JPMorgan CEO Jamie Dimon said in an interview with Reuters last week that the Federal Reserve could raise interest rates above the 5% mark. Stressing that it is too early to declare victory against inflation, Dimon said:

It is perfectly reasonable for the Fed to go to 5% and wait a bit.

However, if inflation drops to 3.5% or 4% and stays there, “you may have to go beyond 5% and that could affect short rates, longer rates,” the executive warned. from JPMorgan.

Federal Reserve Chairman Jerome Powell and several other Fed officials have said more interest rate hikes are needed to rein in inflation. A Reuters poll released on Tuesday showed that 46 out of 86 economists predicted the Federal Reserve would raise interest rates by 25 basis points in March as well as May.

Do you agree with Bank of America, Goldman Sachs, UBS or JPMorgan on the continued Fed interest rate hike? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.