Bank This is America, Goldman SachsJPMorgan, UBS and UBS have all made predictions about the future of the federal funds rate. Banks anticipate that the Federal Reserve will raise interest rates by three times more in the next 12 months.
Major Financial Institutions Anticipate Additional Rate Hikes
As the US Federal Reserve continues its battle with inflation, a few major banks have come together to give their predictions. Bank This is America, Goldman SachsUBS, and JPMorgan have all shared their forecasts to help understand what the future holds. It is expected that the Federal Reserve will increase interest rates over the next 12 months.
Goldman Sachs issued a statement on Thursday, claiming that the US central bank is likely to increase interest rates three times over the course of the year. This is due to a combination of continuing inflation and a robust job market. The financial institution, which had previously predicted 25 basis-point raises at the Fed’s March and May meetings, now expects a 25 basis-point increase at the Fed’s June meeting. The agency’s economists, led by Jan Hatzius, Head of Global Investment Research, explained:
In light of our stronger growth and more accurate inflation data, we are raising our forecast for federal funds rates by 25bp (basis points) at the March and May FOMC meetings. Our forecast for the terminal rate is now 5.25%-5.5%, as of the June FOMC meeting.
Bank This is America Global Research team also predicts that three additional rate hikes will be seen starting with the Federal Reserve’s June meeting. The bank had previously indicated that it expected the Fed to increase interest rates by 25 basis points at its March and May meetings. Bank This is America now expects a 25 basis-point increase at the June Fed meeting, which could push the terminal rate into a 5.25%-5.5% range. The bank released a client note this week:
Resurgent inflation and strong labor gains suggest that the risks to this outlook (implying two rate hikes) are now too one-sided.
UBS, a European financial institution, also mentioned that it expects the Federal Reserve to increase interest rates by 25 basis points at the March and May meetings, which could leave the federal funds rate in a 5-5.25% range. While many are uncertain what the future holds, UBS predicted that the US central bank could lower interest rates this year by cutting rates at its September meeting. The international financing firm wrote in a client note:
We expect the FOMC (Federal Open Market Committee) to turn around and begin reducing rates at the September FOMC meeting.
Meanwhile, JPMorgan Chase forecasted the terminal rate to be at 5.1% by the end of June. JPMorgan CEO Jamie Dimon stated in an interview with Reuters last week that an increase in interest rates above 5% by the Federal Reserve is possible. Emphasizing that it is too soon to declare victory over inflation, Dimon said:
It is certainly possible for the Fed to go up to five percent, but you should wait.
However, if inflation drops to 3 or 4% and stays there, “it may have to go higher than 5% and that could affect short rates, long rates,” the JPMorgan executive warned.
Federal Reserve Chairman Jerome Powell and other Federal Reserve inflation control officers have proposed that an increase in interest rates is necessary. A Reuters poll on Tuesday confirmed that 46 out of 86 economists had forecast the outcome. Federal Reserve interest rates are expected to be raised by 25 basis points at the March and May meetings.
Do you agree with Bank This is America, Goldman Sachs, UBS, or JPMorgan concerning the Fed raising interest rates? Let us know in the comments section.
