Bank of America (BofA) released a report on Friday (28th) saying that as the Federal Reserve (Fed) has almost admitted that interest rate levels are seriously behind the situation, the Fed may raise interest rates 7 times (25 basis points each time) this year, That is, each meeting will raise interest rates 1 time.
The team of Bank of America economist Ethan Harris forecasts that the Fed will raise interest rates seven times in 2022, while citing supply and demand factors, downgrading its forecast for U.S. GDP growth this year to 3.6% from the previous 4%.
Harris said the Fed’s aggressive tightening policy will have a delayed impact on the economy, dragging down economic growth in 2023. The team believes that the target range for the federal funds rate will eventually fall between 2.75% and 3%, and the current level is only 0 to 3%. 0.25%.
Economists said a “comprehensive revision” of the economic and monetary policy outlook for 2022 and 2023 was underway, mainly because unemployment fell faster than expected and supply chain bottlenecks lasted longer than expected, meaning inflation will continue to decline. exacerbated.
The US Commerce Department announced on Friday that the December core personal consumption expenditures (PCE) price index rose 4.9% year-on-year, slightly higher than market expectations and the largest increase in 38 years. The overall PCE price index in December rose 5.8% year-on-year.
Markets are weighing the Fed’s move to raise interest rates this time around as economic growth begins to show signs of slowing. The U.S. Treasury yield curve has flattened sharply since the start of the year, a sign that the Federal Reserve may be limited in raising interest rates without triggering fears of an impending recession.
Data from the CME Group’s FedWatch tool showed a more than 50% chance of at least five 25 basis point rate hikes this year, but only a 6% chance of seven hikes as of Friday, showing Bank of America raising rates. The 7th argument has not yet become a market consensus.
Most U.S. Treasury yields fell on Friday as U.S. consumer confidence fell to a decade low and inflation concerns intensified, with the 10-year U.S. Treasury yield falling to regarding 1.78% and the yield curve steepening once more.