The Federal Reserve is expected to raise the federal funds rate at its next meeting on Wednesday, with JP Morgan economist Michael Ferroli 75 basis point (bps) rate hike, according to the report. Last week, CME Group data showed that the market had factored in a 95% chance that the U.S. would raise rates by 50 basis points this month. However, while some expect a hawkish Fed, others believe the U.S. central bank could take a dovish action if markets deteriorate.
Global markets shook with focus on the Fed’s next rate hike – JPMorgan economists expect 75 bps hike
Major U.S. stock indexes and cryptocurrency markets fell sharply on Monday, making it one of the bloodiest week starts in a long time It was considered one ofCNBC’s Scott Schnippersaid Monday that“S&the P 500 is now in an official bear market, according to S&the P Dow Jones Index.”
Precious metals such as gold and silver also lost value as the price per ounce of gold fell 2.67% and silver dropped 3.58%. The entire crypto economy lost 18% during the day on Monday,with BTCfalling below $21K. All eyes are now focused on the upcoming Federal Open Market Committee (FOMC) meeting, where members of the Federal Reserve are expected to raise the federal funds rate.
A modest increase could be between 25 and 50 bps; the Fed could raise it to 75 to 100 bps at its next meeting,with some predicting75 bps is on the horizon. 75 basis points is on the horizon. Last week, CME Group data showed that the market was factoring in a probability ofLast week, CME Group data had the market factoring in a 95%chance that the Fed would raise its benchmark interest rate by 50 basis points. However, JP Morgan economist Michael Ferroli thinks a 75 bps hike is coming, and 100 bps is also possible.
In a Monday note, Mr. Ferroli toldclients that “a surprising rise in long-term inflation expectations” might push the Fed to raise rates by 75 bps on Wednesday. He added, “We believe the real surprise is the non-trivial risk of a 100 bp rate hike.”
Goldman Sachs economists predict a 75 bps hike – JP Morgan strategist Marko Kolanovic thinks a dovish surprise is likely
Economists at Goldman Sachs agree with Ferroli and think a 75 bps hike is likelyto be announced at the FOMC meeting.“Fed expectations have been revised to include a 75 bps hike in June and July,” Goldman economists explained on Monday.
A Goldman Sachs analyst’s note to investors adds.
We expect two more rate hikes to 3.75-4% in 2023 and one cut to 3.5-3.75% in 2024; we expect a 50bp hike in September, 25bp in November and December, and a final hold at 3.25-3.5%. The median dot at the end of 2022 is 3 .25-3.5%, and we expect it to indicate 3.25-3.5%.
Meanwhile, despite Ferroli’s 75 bps forecast, JP Morgan’sMarko Kolanovic
“Friday’s strong CPI print, along with crypto selling over the weekend, which led to a surge in yields, has weighed on investor sentiment and lowered the market,” Kolanovich’s note to clientsdetailed Monday. The JPMorgan strategist added: “However, we believe the repricing of the interest rate market has gone too far and the Fed will do a dovish surprise compared to what is currently factored into the curve.”
What are your thoughts on the upcoming FOMC meeting and the next rate hike? Do you think it will be moderate or aggressive? Or do you think there will be a dovish surprise? Let us know what you think on this subject in the comments section below.
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