Wall Street banks expect ‘hawkish pause’ from Fed in June

(This story has been corrected to change the dateline to June 12)

(Reuters) – Most big Wall Street banks expect the Federal Reserve to keep interest rates unchanged on Wednesday, while sticking to its hawkish tone due to a strong job market and elevated inflation.

Several economists say that it is a toss-up between a skip and a hike in the June meeting. Most banks expect the central bank to prepare markets for a hike in July.

Money markets are currently pricing in a more than 70% chance of a pause this month, with rate cut expectations pushed out to next year.

Following are forecasts from some big U.S. banks and their global counterparts:

Brokerage June Expectation July Expectation Terminal rate

Name expectations

Citigroup 25 bps hike 25 bps hike 5.5% – 5.75%

HSBC 25 bps hike 5.25% – 5.50%

UBS Pause 25 bps hike 5.25% – 5.50%

Deutsche Pause See Fed raising rates one 5.30%

Bank more time in July

Goldman Pause 25 bps hike 5.25% – 5.50%

Sachs

Barclays Pause Expects 50 bps of hikes

through September; expects Fed

to signal a hike in July

J.P.Morgan Pause No hike 5% – 5.25%

Morgan Pause No hike 5% – 5.25%

Stanley

BofA Pause Sees a July hike as “highly 5% – 5.25%

probable”

Wells Fargo Pause No hike 5% – 5.25%

Nomura Pause

(Compiled by Broker Research team in Bengaluru)