Bank of America, Goldman Sachs, JPMorgan, UBS Share Predictions About Further Fed Rate Hikes

Bank of America, Goldman Sachs, JP Morgan, and UBS share predictions about the Federal Reserve raising rates further. Bank of America and Goldman Sachs, for example, now expect the Fed to raise interest rates three more times this year.

Major Banks Predict More Fed Rate Hikes

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As the Federal Reserve continues to battle inflation, several major banks, including Bank of America, Goldman Sachs, UBS, and JPMorgan, have released their forecasts for how much more the Fed how much more the Fed will raise interest rates this year.

Goldman Sachs said in a Thursday note that it expects the U.S. central bank to raise rates three more times this year after data released Thursday pointed to sustained inflation and a recovering labor market. Previously, he had expected a 25 basis point rate hike at the March and May meetings, and now expects another hike in June. The firm’s economists, led by Jan Hatzius, head of global investment research and chief economist, detailed.

Given the news of stronger growth and more robust inflation, we are adding a 25 basis point rate hike in June to our Fed forecast, bringing the peak funds rate to 5.25%-5.5%.

Bank of America Global Research similarly expects the Fed to raise rates three more times this year. The bank earlier indicated that it expects the Fed to raise rates by 25 basis points each at its March and May meetings. Bank of America now expects another 25 basis point hike at the June Fed meeting, which would raise the terminal rate to the 5.25%-5.5% range. The bank explained in a client note this week.

The resurgence of inflation and solid employment growth mean that the risks to this (only two rate hikes) outlook are too one-sided for our liking.

European investment bank UBS also said it expects the Fed to raise rates by 25 basis points at its March and May meetings, which could keep the FF rate in the 5%-5.25% range. While many do not expect the Fed to cut rates this year, UBS estimates that the U.S. central bank will ease rates at its September meeting. The global investment bank recently wrote in a client note:

We expect the FOMC (Federal Open Market Committee) to take a turn and cut rates at its September meeting.

Meanwhile, JP Morgan Chase expects the terminal rate to be 5.1% by the end of June; JP Morgan CEO Jamie Dimon said in an interview with Reuters last week that the Federal Reserve could raise rates beyond 5%. Emphasizing that it is premature to declare victory over inflation, Dimon opined.

It is perfectly reasonable for the Fed to go to 5% and wait a while.

But if inflation falls to 3.5% or 4% and stays there, “it may have to go higher than 5%, and that could affect short-term and long-term rates,” warned the JP Morgan executive.

Federal Reserve ChairmanJerome Powell

and several other Fed officials have said that further rate hikes are needed to keep inflation in check. A Reuters poll released Tuesday found that 46 of 86 economists expect the Fed to raise rates by 25 basis points in May as well as March.