Investors could prepare for seven interest rate hikes by the Federal Reserve by 25 basis points each in 2022, or one in each remaining meeting for the year, BofA Global Research said in a note.
In particular, economist Ethan Harris and other analysts “see” seven increases in 2022, although they revised down their forecast for GDP growth for 2022 to 3.6%, from 4% in the previous estimate , citing supply and demand factors.
The US government bond yield curve has flattened since the beginning of the year, warning that there may be limits to how far Fed policymakers can go in raising interest rates without triggering fears of an impending recession.
“The Fed’s aggressive tightening should affect the economy with a delay, boosting growth in 2023,” analysts wrote, estimating that the interest rate will end the year between 2.75% and 3%, compared to the current level of 0 to 0.25%.
Economists point out that “an even faster-than-expected drop in unemployment and more pronounced supply disruptions signal high inflation.”
BofA’s estimate of seven interest rate hikes in 2022 is not yet universally accepted. Fed futures show more than a 50% chance of five interest rate hikes this year by 25 basis points each, while the odds of seven raises are just 7%, according to CME’s FedWatch tool.
Source From: Capital
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