Goldman Sachs and BofA see more Fed rate hikes this year

“In light of higher growth and stronger inflation news, we add a 25 basis point (bp) rate hike in June to our Federal Reserve forecast, for a top funds rate of 5.25%- 5.5%,” Goldman Sachs economists led by Jan Hatzius said in a note dated Thursday.

Meanwhile, money markets are currently pricing in a terminal rate of 5.3% for July. BofA Global Research also expects a 25 basis point hike at the June Federal Reserve meeting, which would put the official interest rate at between 5.25% and 5.5%. Previously, he had forecast two rate hikes of 25 points each at the March and May meetings.

“Resurgence in inflation and robust job gains make the risks in this outlook (just two interest rate hikes) too one-sided for our liking,” BofA wrote in a note to clients.

Following recent US data, European investment bank UBS said it expected the Fed to raise rates by a quarter of a percentage point at its March and May meetings, leaving the federal funds rate in the 5% range. -5.25%

Unlike its US counterparts, however, UBS estimated that the Fed would cut interest rates at its meeting in September this year.

Prior to the recent US data, JP Morgan had forecast the terminal rate at 5.1% at the end of June.

Most 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, with the risk of raising rates further.

None of them expect a rate cut this year.