(Reuters) – Bank of America expects the Federal Reserve (Fed) to hike interest rates by 25 basis points seven times this year from March, one of the highest forecasts strong in terms of monetary tightening in the United States from a major Wall Street bank.
Following its monetary policy committee meeting, the Fed hinted on Wednesday that it would raise rates in March and reaffirmed its intention to end its bond purchases that same month in order to counter the acceleration of inflation.
“The Fed has all but admitted that it is seriously behind the curve” in rates, Bank of America economists said, saying aggressive monetary tightening is expected to weigh on growth in the world’s largest economy in 2023.
Other major banks have also revised their forecasts for rate hikes in the United States: Deutsche Bank expects five rate hikes, TD Securities predicts four and BNP Paribas sees up to six.
Money market futures indicate that market participants are expecting five rate hikes before the end of the year, with four likely by September.
The rise in the PCE consumer price index excluding energy and unprocessed food could reach 3.0% in the fourth quarter, according to Bank of America, against 2.6% previously expected.
Bank of America further lowered its forecast for U.S. gross domestic product growth in 2022 from 4% to 3.6%, noting that “a combination of supply and demand factors point to a weaker growth this year.”
(Report Karen Brettell, French version Laetitia Volga, edited by Bertrand Boucey)
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