US Federal Reserve to Hike Rates Beyond 6% This Year?
By The US Federal Reserve has been gradually increasing its benchmark interest rate in order to control inflation since March 2022.[0] After a series of 75 basis point increases in the same year, the Fed reduced the short-term rate by 50 points at the last December meeting. On February 1, the following year, the 25-basis-point increase pushed rates to 4.625%.[1]
The central bank has indicated a forecast peak of 5.1% for its policy rate and no rate cuts in 2023.[2] A Reuters survey of economists revealed that, aside from Goldman Sachs, many other economists believe the US Federal Reserve will raise interest rates at least twice more in the near future.[3] None of the analysts anticipated a rate reduction in 2023.[4] Prior to the discharge of new US data, J.P. Morgan projected a funds rate of 5.1% by the end of June.[4] Bofa Global Research estimated that the terminal rate by the end of 2023 would be in the range of 5.0% to 5.25%.[4] UBS had forecasted two rate increases of 25 basis points each, while the prior prediction was higher than their estimates.[4] European Investment Bank has operations in March, there may be a rate increase in Europe, according to them.[4] This hiking cycle will soon be over.[4] The policy aim will stay at 4.75-5% until the end of 2023.[4]
By year-end, the Federal Reserve has the capability to control inflation, yet doing so will necessitate a number of steps.[5] By providing a clearer path to success, the Federal Reserve can increase its chances of achieving its goals.[5] Our research into inflation shows that for the Federal Reserve to consider their efforts a success, the core CPI should remain close to 2 percent over a one-year period.[5] In order to do so, the Fed should announce its intent to conduct monetary policy in a manner to confine the growth in current dollar spending (GDP) to no more than 4 percent.[5]
Wall Street traders are now placing a bet that the United States Federal Reserve will hike interest rates beyond 6% this year. Preliminary open interest data from the Chicago Mercantile Exchange is demonstrating an increase in current trading activity, according to Bloomberg.[6] On Tuesday, it was reported that a trader has wagered roughly $18 million that the Federal Reserve will raise the interest rate to 6% by the expiration of the current options in September.
0. “Why the Fed Will Hike Rates Higher Than Expected: Inflation Forecast” Business Insider, 16 Feb. 2023, https://www.businessinsider.com/federal-reserve-hike-rates-higher-inflation-forecast-recession-economy-powell-2023-2
1. “The Fed And Markets” Barchart, 13 Feb. 2023, https://www.barchart.com/story/news/14154836/the-fed-and-markets
2. “Fed Swaps Price in March and May Rate Hikes, Expect Peak at 5.3%” Yahoo! Voices, 17 Feb. 2023, https://www.yahoo.com/now/fed-swaps-price-march-may-154025367.html
3. “Federal Reserve to hike rates by 25 bps each in March, May and June – Goldman Sachs” FXStreet, 17 Feb. 2023, https://www.fxstreet.com/news/federal-reserve-to-hike-rates-by-25-bps-each-in-march-may-and-june-goldman-sachs-202302170352
4. “Goldman Sachs forecasts three additional US Fed rate hikes but no reductions in 2023” Business Upturn, 17 Feb. 2023, https://www.businessupturn.com/world/goldman-sachs-forecasts-three-additional-us-fed-rate-hikes-but-no-reductions-in-2023/
5. “Will the Federal Reserve Hit Its Year-End Inflation Target?” The Epoch Times, 17 Feb. 2023, https://www.theepochtimes.com/will-the-federal-reserve-hit-its-year-end-inflation-target_5063967.html
6. “Wall Street Traders Betting Interest Rate Will Surpass 6% This Year” Coinspeaker, 9 Feb. 2023, https://www.coinspeaker.com/wall-street-traders-interest-rate/
