– Major investment banks have pencilled in a strong run of interest rate hikes for 2022 after hotter-than-expected inflation data ramped up pressure on the Federal Reserve to take a firmer stand against soaring prices.
Data last week showed U.S. consumer prices rose at their fastest pace since the early 1980s, fuelling market speculation for a hefty 50-basis-point hike from the Fed’s March 15-16 meeting.
The current Fed fund effective target is 0-0.25%.
As the Fed gets set to raise pandemic-era rates, here are the estimates from major global investment banks on how far and fast rates will rise:
* Morgan Stanley now expects the Fed to deliver six 25 bps hikes this year. It had previously forecast 125 bps of tightening via four 25 bps rate hikes plus a 25 bps fed funds equivalent runoff of the Fed’s balance sheet.
* UBS now expects 150 bps of tightening this year via six consecutive quarter-point moves from March through November. It had previously forecast 25 bps increases in March and June, then “a potential shift toward an every meeting hike pace”.
* BNP Paribas expects six hikes of 25 bps this year starting in March, resulting in a cumulative 150 bps of tightening.
* Citi now expects 150 bps of tightening this year, starting with a 50 bps move in March, followed by four, quarter-point increases in May, June, September and December.
* Credit Suisse now expects the Fed to hike a cumulative 175 bps this year, beginning with a 50 bps increase at the upcoming March meeting.
* Societe Generale now expects five rate hikes of 25 bps this year, starting in March.
* Goldman Sachs said it is raising its forecast to include seven consecutive 25 bps rate hikes at each of the remaining Federal Open Market Committee (FOMC) meetings in 2022 from a previous expectation of five hikes.
* BofA Global Research expects the Fed to hike rates by 25 bps at each of this year’s remaining seven meetings, unchanged from its previous outlook. However, it said there is a risk of a 50 bps hike in the Fed’s March policy meeting.
* HSBC’s said it expects the Fed to roll out a 50 bps hike in March and four more quarter-point rate rises in 2022.
* Deutsche Bank said it expects the Fed to call a 50 bps hike in March plus five more 25 bps hikes in 2022, with a hike at all but the November meeting.
* J.P.Morgan said on Jan. 28 it expects five rate hikes in 2022, up from the four it estimated previously.
* Barclays now expects the Fed to raise rates by 25 bps five times this year, up from three hikes forecast earlier.
(Reporting by Aniruddha Ghosh in Bengaluru and Jamie McGeever; Editing by Devika Syamnath and Alistair Bell)
