(Updates Barclays view, money market expectations)
(Reuters) – Most Wall Street banks expect the U.S. Federal Reserve to hike the benchmark interest rate by 25 basis points at the end of its two-day meeting on Wednesday, while money markets are leaning toward a pause as worries about a global banking crisis mount.
In a quick reversal of expectations, money markets are pricing in a near 60% chance of a pause following 450 basis points of hike since last March. That followed fears of stress on the banking system from the collapse of two mid-sized U.S. lenders this month.
On Sunday, a Swiss-backed takeover of Credit Suisse by peer UBS helped calmed some fears of a contagion, but uncertainties remain over the ramifications of the deal.
A majority of economists in a Reuters poll published last week had also forecast a 25 bps hike.
Following are rate expectations from major Wall Street banks:
Bank Expectation post SVB Expectation before SVB
crisis and U.S. Feb CPI crisis
March hike Terminal March Terminal rate
(in bps) rate hike
(in
bps)
Goldman No hike 5.25% – 5.5% 25 5.5% – 5.75%
JPM 25 5% – 5.25% 25 5% – 5.25%
Citi 25 5.5% – 5.75% 50 5.5% – 5.75%
BofA 25 5.25% – 5.5% 25 5.25% – 5.5%
Morgan 25 5.125% 25 5.125%
Stanley
Barclays 25 5% – 5.25% 50 5.5% – 5.75%
NatWest No hike N/A 50 N/A
Nomura 25 bp cut N/A 50 N/A
(Editing by Anil D’Silva, Sam Holmes, Vinay Dwivedi and Sriraj Kalluvila)