How many rate hikes will the Fed make? wall street is divided

Major Wall Street banks are divided on the speed and magnitude of the Fed’s rate hikes, after its chairman Jerome Powell signaled it could be more aggressive than anticipated to fight stronger inflation. of the last four decades.

With Powell refusing to give specific guidance on what the Fed might do beyond indicating it will raise rates in March, economists and investors are casting differing views on the future, risking unsettled markets.

After coalescing around a forecast of four quarter-point hikes in 2022, most now agree the Fed will raise rates by 25 basis points in March, though Nomura Holdings Inc. estimates the first 50-point hike. basic since 2000.

The differences then begin to widen:

• How often will the Fed raise rates this year (three, four, five, six or seven times)
• In which months will you raise rates after March
• What will you do in 2023
• Where will the referral rate peak

There is also disagreement about when he will announce the reduction of his huge bond holdings, although many economists have advanced the date they estimate that it will happen.

A weekend report from economists at Goldman Sachs Group Inc. highlighted the difficulty of predicting the Federal Open Market Committee (FOMC).

“The FOMC could rise less than five times if market conditions change abruptly at any point or if the economy slows even more than our below-consensus projection implies.”, said the economists led by Jan Hatzius. “But it could also go up more than five times in 2022 if inflation stays high enough that going higher at every meeting is also a natural course later in the year.”

Here is a summary of the banks’ projections:

Bank of America Corp.

• Seven quarter-point hikes this year, acting at each remaining policy meeting to end 2022 in a range between 1.75% and 2%
• Balance reduction to be announced in May
• One hike in each quarter of 2023, taking the reference rate to a maximum of between 2.75% and 3%

Nomura Holdings Inc.

• A 50 basis point hike in March, followed by four quarter point hikes in May, June, July and December, to end the year between 1.5% and 1.75%
• Balance reduction will be announced in May, and will be implemented in June
• Quarter point hikes in June and December 2023

BNP Paribas S.A.

• Six quarter-point hikes this year, at every remaining meeting except November, to end 2022 between 1.5% and 1.75%
• Balance reduction will be announced in June, and will be implemented in July
• Additional increases in 2023 to end the year between 2.25% and 2.5%

Goldman Sachs Group Inc.

• Five quarter-point hikes this year, in March, May, July, September and December, to reach between 1.25% and 1.5%
• Balance reduction to be announced in June
• In 2023, three quarter-point hikes, followed by more in 2024 to reach between 2.5% and 2.75%

JPMorgan Chase & Co.

• Five quarter-point hikes this year, in March, May, July, November and December, to reach between 1.25% and 1.5%
• Balance reduction to be announced in June
• Two hikes in early 2023 and then in June to finish between 2.5% and 2.75%
• “If events call for a larger tightening than in our projection, we would first remove these pauses before contemplating 50 basis point hikes”, wrote the economist Michael Feroli

Deutsche Bank AG

• Five quarter-point increases this year, in March, May and June, then quarterly in the second half, to reach between 1.25% and 1.5%
• Balance reduction to be announced in July
• Three increases in 2023 to leave the rate just above 2%

Wells Fargo Securities LLC

• Five quarter-point increases this year, in March, May, June, September and December, to reach between 1.25% and 1.5%
• Balance reduction to be announced in July
• Another 75 basis points of rate hikes in 2023

Citigroup Inc.

• Five quarter-point increases this year, in March, May and June, then quarterly in the second half, to reach between 1.25% and 1.5%
• Balance reduction will be announced in June, and will be implemented in July
• Quarterly increases in 2023 to reach 2.25% to 2.5% at the end of the year

Morgan Stanley

• It maintains its projection of increases in March, June, September and December, although with a “significant risk that at least some of these increases will be made sequentially.”
• Balance reduction to be announced in July
• Two increases in 2023 to reach between 1.5% and 1.75%

Standard Chartered Plc

• Projects four consecutive increases of a quarter point for March, May, June and July
• Balance reduction to be announced in May
• Two hikes in 2023 to end the year between 1.5% and 1.75%

Barclays Plc

• It continues projecting increases in March, June and September, raising the reference rate to between 0.75% and 1%
• Balance reduction to be announced in May
• Three more increases in 2023 to reach between 1.5% and 1.75%