(Finance) – To the comments of various officials of the Federal Reserve which portend a more aggressive policy on American interest rates are added to the forecasts of other restrictive measures by economists of Goldman Sachs And Bank of America (BofA)
The latest macroeconomic data showed that inflation remains strong, thus dampening hopes that rates could fall in the coming months. Producer prices rose in January, while a Labor Department report showed the number of Americans filing new jobless claims dropped unexpectedly last week.
Goldman Sachs and Bank of America now expect the Fed to raise borrowing costs three more times this year, revising their estimates upwards in light of data that pointed to persistent inflation and a resilient job market.
“In light of stronger growth and firmer inflation news, we are adding a 25bps (bp) rate hike in June to our Fed forecast, for a cap funds rate of 5.25%-5 .5%”, explained the economists of Goldman Sachs led by Jan Hatzius.
Meanwhile, money markets are currently pricing in a terminal rate of 5.3% by July.
BofA Global Research also expects a 25 basis point hike at its June Fed meeting, pushing the terminal rate to a range of 5.25% to 5.5%. It had previously forecast two rate hikes of 25 basis points each at its March and May meetings.
“Picking up inflation and solid job gains mean the risks to this outlook (just two interest rate hikes) are too one-sided,” the BofA underlined in a note.