(Bloomberg) — Wall Street’s biggest banks are sticking by their calls for as many as seven Federal Reserve interest-rate hikes this year even as traders and some of their peers ratchet back expectations.

Bank of America Corp. (NYSE:) And Goldman Sachs Group Inc (NYSE:). still predict the U.S. central bank will raise its benchmark to 2% by year-end from the current range of zero to 0.25%, while JPMorgan Chase & Co. (NYSE:) sees the rate reaching 2% in early 2023. The Fed will have to take action because of rising inflation.

The sanctions placed on Ukraine by Russia and their invasion may have a negative impact on global growth. However, these measures will increase consumer prices as they push raw material prices higher.

“The underlying rationale for normalization hasn’t yet changed,” said Praveen Korapathy, a strategist at Goldman Sachs in New York. “If all we get is a small hit to growth and still elevated inflation, it makes the Fed’s trade-off worse, but I don’t think it would get them to sit on their hands.”

The rate traders have a different view. In recent days, the Fed’s chances of tightening have been lowered as sanctions on Russia have adversely affected global-growth prospects. Money markets have pared pricing for a rate hike in March to a quarter point from a half-point prior to the invasion, and they now predict the central bank’s key rate will peak at 1.7%, well below the Fed’s long-term estimate of 2.5%.

TD Securities Inc. joins the group of people who are revising their views. The company now sees a smaller Fed hike this month than it earlier envisaged, and it’s shifting some of its anticipated rate increases to next year. 

Reduced Bets

Treasuries’ latest rally, in which five-year yields fell by 27 basis point over the past 2 days, has ended some large bearish bets on rates and credit markets. NatWest Markets Plc said Wednesday it was stopped out of “core strategic investment stances,” and exited money-market positions that were betting on a steeper path of hikes.

“Given the Fed’s twin-mandate of goals of maximum employment and price stability — most market participants have lowered their expectations of the cumulative number of interest rate hikes — not just for year 2022, but beyond,” John Herrmann and Jan Nevruzi wrote in a research note published Tuesday.

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