If you’ve been following financial news, you know that the U.S. Federal Reserve is planning interest rate hikes for 2022, most likely beginning in March after their next Federal Open Market Committee meeting. The rate hikes are expected to curb inflation.
Following the biggest jump the U.S. consumer price index has seen in more than four decades, with the CPI rising 7.5% in January, financial experts and Wall Street analysts are now predicting the Fed may increase interest rates faster and more frequently than previously estimated.
Goldman Sachs Group wrote in a report to clients that the Fed may hike rates seven times, instead of five, with a 25 basis-point hike each time, Bloomberg reported. Goldman Sachs officials said that a 50 basis points hike in March is unlikely.
HSBC economists, on the other hand, predict a 50 basis point hike in March, with four additional 25 basis-point increases to follow through the rest of the year, Bloomberg reported. Nomura Holdings Inc. also agreed that a half-point increase is likely for March.
Economists at Citi are also forecasting a 50 basis-point hike in March, CNBC.com reported, followed by four additional hikes of 25bp through 2022.
Bloomberg stated that economists are split on whether the first rate hike will be a one-quarter or half-point hike. St. Louis Fed President James Bullard told Bloomberg last Thursday, February 10, that he foresees three rate hikes by July 2022, with one being 50bp hike. But some fed officials disagree with such rapid, aggressive hikes.
San Francisco Fed President Mary Daly said a half-point rate hike would not be her preference, Bloomberg reported. Meanwhile, Richmond Fed President Thomas Barkin remained on the fence. “Do I think there’s a screaming need to do it right now?” he pondered at a virtual meeting hosted by the Stanford Institute for Economic Policy Research. “I’d have to be convinced of that,” he said.
Some economists are advising a slower approach, as well. “This more aggressive policy response raises downside risks to growth,” economists from Deutsche Bank AG wrote in a note reported by Bloomberg. “Engineering a soft landing for the economy is never easy.”
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