Factbox-Fed price watch: Powell fuels bets of longer hike cycle, greater charges



(Reuters) – Because the U.S. economic system holds up higher than anticipated within the face of aggressive rate of interest hikes, markets have began pricing in the next peak price because the Federal Reserve battles sticky inflation in a good labor market.

Fed Chair Jerome Powell’s hawkish testimony to congress on March 7 additional strengthened these views, with cash markets now pricing in an over 65% probability for a bigger 50bps hike in March, in comparison with lower than 30% earlier than the testimony.

The Fed funds price is presently at 4.5-4.75%, and merchants see it peaking at 5.62% in September. 

Following are expectations from some main funding banks and brokerages:

Banks March hike Terminal price Feedback

expectations expectations

(in bps)

NatWest 50 5.75% * “We put the percentages at about 60%

that the FOMC hikes by 50 bps (in


* Sees “affordable

BlackRock probability that the Fed must

carry the Fed Funds price to six%,

after which hold it there for an

prolonged interval”

Goldman 25 5.5% * Sees “some threat” of

Sachs – 5.75% a 50bps hike in March

* Sees 25 bps hikes in

Might, June, July

Barclays 25 5.40% * Sees “good probability” of fifty bps

hike in March, particularly if March

10 payrolls knowledge is strong

* Expects extra Fed price setters to

revise their 2023 dot from 5.1% to

5.4% in March assembly

BofA 25 5.25% – 5.5% * Expects 25 bps hikes in Might and


* “Resilience of demand-driven

inflation means the Fed may need

to boost charges nearer to six%”

* Expects U.S. economic system to tip into

recession in Q3 2023

* “Our base case has

Citi 50 5.5%-5.75% core PCE operating 4.5-5% YoY for

the following 5 months and Fed

officers may really feel a terminal

price within the excessive 5% vary is


Nordea 25 5.75% – 6% * Expects Fed to proceed mountain climbing

by 25 bps till the September


Wells 25 5.25% – 5.5% * Anticipates Fed will end

Fargo elevating charges by mid-year 2023;

doesn’t anticipate price cuts in 2023

UBS 25 5.25% – 5.5% * “If upcoming knowledge is

too robust then the Fed might really feel

compelled to hike by 50bps (in


* Expects 25 bps hike

in Might, June

* “We undertaking the FOMC turns

towards slicing charges on the

September assembly, and brings the

funds price again all the way down to a nonetheless

restrictive 4.00% to 4.25% on the

finish of 2023.”

RBC 25 5.5% * Says terminal of 5.5% is

pointless; “there appears to be an

overreaction to latest knowledge”

* Expects Fed to chop charges if

unemployment price reaches 4.5% by

year-end and coincides with core

inflation slowing to round 3%

Morgan 25 5.13% * Sees return to 50 bps hike as

Stanley unlikely

* Expects first price lower in March


Deutsche 25 5.60% * Bar for return to a 50 bps tempo

Financial institution is excessive

* Expects first Fed price lower in Q1


* Sees average recession beginning

This autumn 2023

J.P.Morgan 25 5% – 5.25% * Sees solely 20% probability of fifty bps

hike in March

* Expects one other hike in Might with

the “probability of June”

* Doesn’t anticipate the Fed to ease

later this yr

(Compiled by the Dealer Analysis staff in Bengaluru; Enhancing by Saumyadeb Chakrabarty, Sweta Singh and Anil D’Silva)

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