That Federal Reserve is going to raise rates and nobody doubts it, so the stakes revolve around how many raises you will approve and when.
About, JP Morgan economists predict the Fed will raise rates in September, which means changing your previous forecast, in which they did not expect changes in interest rates next year.
In a new outlook released to clients Wednesday night, US economists at JP Morgan led by Michael Feroli said that by the middle of next year the central bank’s goal of full employment will be met.
As a consequence, this will cause the Fed Open Market Committee raise your benchmark rate from almost zero in September.
Furthermore, JP Morgan expects the Fed to approve another hike in December and embark on a path to higher interest rates with further hikes every quarter.
The Fed’s tone will not be aggressive
Although JP Morgan has modified its forecast on rate hikes, there is no general consensus among analysts.
The market, taking into account the high inflation rate, expects that the bank that Powell runs be more aggressive, an opinion not shared by analysts.
The economists of Goldman Sachs said last month that they expect the central bank to raise rates in July. Instead, their counterparts from Morgan Stanley still see that the Fed will not change rates over the next year.
And they use as an argument that the Fed insists on the transitory nature of inflation.
Indeed, the member of the Fed, Evans, has recognized that gasoline prices are high, but so is the stock market.
Meanwhile, Huw Davies, Jupiter AM Deputy Fixed Income Fund Manager, notes that the Fed “Maintains an accommodative political stance from the FOMC” and “Seems to be looking for a better combination between inflation and growth”.
Likewise, the expert also points out that “the Fed is clearly more relaxed about the ability of supply chains to normalize the supply of goods and services and, therefore, alleviate inflationary pressures.”
When will the uploads stop?
Considering that the Federal Reserve will begin approving raises every three months starting in 2023, investors are wondering when they will stop.
In this sense, JP Morgan analysts point out that “the central bank will stop when the rate adjusted for inflation returns to zero.”
The Concern about rising prices is behind market pressures for central banks to raise interest rates because they believe that inflation will be more permanent than they indicate.
The inflation data that are becoming known are surprising to the upside which serves as an argument to maintain these pressures. Thus, prices in the United States stood at 6.2 percent in October, above the consensus.
In the euro area, they double the target set by the ECB of 2 percent (it stood at 4.1 percent).
The Bank of England holds the key
The Bank of England came into the spotlight, not because of political action, but because of lack of political action, he explains. Seema Shah, Chief Strategist at Principal Global Investors.
With inflation rates persistently surprising to the upside in recent months and the CPI expected to hit a strong 5 percent in April, there had been considerable speculation that the central bank would carry out its first rate hike after the pandemic.
However, it seems that – in a total twist from recent speeches – the Bank is perhaps more concerned about slowing growth than rising inflation.
That’s a theory, But as the bank continues to indicate that interest rates will rise in the coming months to meet its objective, the tightening agenda is still there.