May 28, 2024

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The central bank is expected to raise rates seven times this year to combat inflation, BofA says.

Bank of America economists expect Federal Reserve As central bank policymakers want to tackle the worst inflation in nearly four decades, they will have to raise interest rates at every meeting throughout the year.

Bank of America economists – led by Ethan Harris – forecast a seven-quarter point rate increase to 2022 in 2022, pushing the end-of-year target range between 2.75% and 3%.

“The central bank has acknowledged that it is actively behind the curve,” they wrote. “It should hit the economy with a recession weighing 2023 growth.”

Fed signals that interest rate hikes may come ‘soon’ as inflation rises

Economists are eager to revise their outlook after the central bank said last week at its two-day policy-making meeting that it could raise rates “quickly” for the first time in three years. Prices under control. The rate hike is the first since December 2018.

A woman walks past the Federal Reserve headquarters in Washington on September 16, 2015. (Reuters / Kevin Lamarck / Reuters photos)

“With inflation above 2% and a strong labor market, the Committee expects it to be appropriate to raise the target limit for the federal finance ratio soon,” the central bank said in a statement after the meeting. The next meeting of the Central Bank is scheduled for March 15-16; It has six meetings in May, June, July, September, November and December.

Other Wall Street banks have also raised expectations of a rate hike this year: for example, Goldman Sachs has a pencil in five increases, while Deutsche Bank sees five and TD Securities four. According to the CME panel that oversees trade, most traders are setting prices for at least five tariff hikes this year, with more than three-quarters expecting four tariff hikes by September.

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For months, the central bank has been wrestling with the dual mandate of its fixed prices and full employment. But the country’s unemployment rate fell to 3.9% in December, down from an epidemic of 14.7%, while consumer prices rose 7.1% from a year earlier, marking the fastest pace of inflation since 1982. Congested ports and other disruptions caused by infection in the supply chain.

Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell was suspended during a news conference in Washington on January 29, 2020. (AP Photo / Manual Paul Senate, File / AP Newsroom)

“I would say, this view is pervasive in the panel, and calls on both sides of the mandate to move steadily away from the highest consensus policies we have brought in during the challenging conditions that the economy has previously faced in the epidemic,” Fed President Jerome Powell told reporters after the meeting. “Most FOMC participants agree that labor market conditions are compatible with maximum employment.”

Some economists believe the central bank has been waiting too long to deal with the eruption of inflation, while others have expressed concern that moving too quickly to stabilize prices will slow down hiring and put many workers, especially low-income Americans, at risk of losing their jobs. Raising interest rates creates higher rates on consumer and business loans, which slow down the economy by forcing employers to cut costs.

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Powell has opened up the possibility of a rate hike at every meeting this year, and has refused to rule out a more aggressive, half-percentage point rate hike, but said it was important to be “humble and fast.”

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“We will be guided by the incoming data and the emerging perspective,” he said.