The Federal Reserve has made clear it intends to start raising interest rates soon.
But economists at major banks have split views on how many times the Fed will act this year and when, even as interest-rate futures traders see a 67% probability the central bank will lift rates at least five times this year.
Goldman Sachs economists led by Jan Hatzius pointed out in a weekend commentary why it’s tough to predict exactly what the Fed will do.
“The [Fed] could hike fewer than five times if market conditions change abruptly at some point or if the economy decelerates even more than our below-consensus forecast implies,” the economists said, according to Bloomberg.
“But it could also hike more than five times in 2022 if inflation remains high enough to make continuing to hike at every meeting a natural course later in the year as well.” Consumer prices soared 7% last year, the highest 12-month total in 39 years.
Bloomberg compiled the forecasts of several major banks as to when and by what amounts the Fed will boost rates this year. There is widespread agreement that the Fed will begin boosting rates in March by 25 basis points. But even that view isn’t unanimous, with Nomura Holdings forecasting a 50-basis point move in March.
Bank of America predicts the Fed will tighten by 25 basis points at each of its remaining seven meetings this year, pushing the federal funds target range to 1.75% to 2% by year end.
BNP Paribas forecasts six 25-basis point moves this year, skipping the November meeting, and leaving the fed funds rate at 1.5% to 1.75%.
Goldman Sachs, JPMorgan Chase, Citigroup, Deutsche Bank and Wells Fargo call for five increases of 25 basis points, leaving the fed funds rate at 1.25% to 1.5% at year-end.
Nomura sees the same year-end level, but thinks it will be one 50 basis-point increase, followed by three 25-basis point moves to get there.
Morgan Stanley and Standard Chartered predict four 25-basis point increases, putting the year-end fed funds target rate at 1% to 1.25%.
And Barclays sees just three 25-basis point rate hikes, leaving the year-end federal funds rate target at 0.75% to 1%.
