Goldman ups Fed hike forecast to 7 rate increases in 2022 after CPI data

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FILE PHOTO: The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City

HONG KONG -Goldman Sachs said it expects seven 25 basis point interest rate rises from the U.S. Federal Reserve this year, up from its previous forecast of five and updating its forecast after Thursday’s U.S. inflation data.

U.S. consumer prices surged 7.5% last month on a year-over-year basis, topping economists’ estimates of 7.3% and marking the biggest annual increase in inflation in 40 years, further adding to pressure on the Fed to raise rates more aggressively.

HSBC’s U.S. economist Ryan Wang said the bank now expects the Fed to front-load rate rises more than previously anticipated, with a 50 basis point hike in March and four additional quarter-point rate rises in 2022. As per HSBC, that will lift the federal funds target range from 0-0.25% to 1.50-1.75%.

“This would amount to 150 bps in rate hikes this year, vs our previous forecast of three 25 bps rate hikes,” Wang said in a note.

Deutsche Bank said in a daily markets note that its economists had also raised their Fed call to a 50 bps hike in March plus five more 25 bps hikes in 2022, with a hike at all but the November meeting and totalling 175 bps in 2022.

Deutsche economists “also highlight the increasing risk of a 2023 or 2024 recession”, the note said.

(Reporting by Alun JohnAdditional reporting by Vidya Ranganathan in SingaporeEditing by Catherine Evans)