Goldman Sachs, BofA expect three more rate hikes in the US this year

Feb. 17 (Reuters) – Goldman Sachs and Bank of America said they expect the US Federal Reserve to raise rates three more times this year, boosting their estimates after data pointed to continued inflation and a resilient labor market.

Producer prices rose by the largest margin in seven months in January, according to data released Thursday, while a Labor Department report found that the number of Americans filing new claims for unemployment benefits fell unexpectedly last week.

“In light of stronger growth and firmer inflation news, we are adding a 25 bps (bps) rate hike in June to our Fed forecast for a peak rate of 5.25%-5.5%,” said Goldman Sachs economists. led by Jan Hatzius. as stated in a note from Thursday.

Meanwhile, money markets are currently forecasting a final interest rate of 5.3% by July.

BofA Global Research also expects a 25 basis point hike at the Fed’s June meeting, which will push the closing rate to a range of 5.25%-5.5%.

It had previously signed two rate hikes of 25 basis points each at its March and May meetings.

“Resurgent inflation and solid employment gains mean the risks to this (only two rate hikes) outlook are too one-sided for our liking,” BofA wrote in a client note.

Following the recent US data, European investment bank UBS said it expected the Fed to raise rates by 25 basis points at its March and May meetings, pushing the Fed Funds rate into the 5%-5.25% range. to stay.

However, in stark contrast to its US peers, UBS estimated that the Fed would cut interest rates at its September meeting this year.

Before the recent US data, JP Morgan had predicted that interest rates would reach 5.1% at the end of June.

A majority of economists polled by Reuters ahead of the latest data said they expected the Fed to raise rates at least twice more in the coming months, at the risk of going even higher. None of them expect a rate cut this year.

Reporting by Aniruddha Ghosh and Siddarth S in Bengaluru; Edited by Savio D’Souza, Anil D’Silva and Devika Syamnath

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