Stock Groups

BofA, Goldman Stick to Fed Forecasts Even as Traders Trim Bets -Breaking


© Reuters. BofA and Goldman Stick to Fed Predictions Even As Traders Cut Bets

(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.

©2022 Bloomberg L.P.


Disclaimer: Fusion MediaWe remind you that this site does not contain accurate or real-time data. CFDs include stocks, indexes and futures. Prices are provided not by the exchanges. Market makers provide them. Therefore, prices can be inaccurate and differ from actual market prices. These prices should not be used for trading. Fusion Media is not responsible for trading losses that may be incurred as a consequence of the use of this data.

Fusion MediaFusion Media or any other person involved in the website will not be held responsible for any loss or damage resulting from reliance on this information, including charts, buy/sell signals, and data. You should be aware of all the potential risks and expenses associated with trading in the financial market. It is among the most dangerous investment types.