How hawkish will the Federal Reserve be this year?
At the moment, Wall Street economists seem to be telling their clients “more hawkish than we thought five minutes ago.”
The strong U.S. consumer inflation data reported Thursday has set off what looks like a chain reaction of upward revisions to projected interest rates rises and where the Fed is headed with monetary policy.
Fed watchers are talking seriously about an “emergency” interest rate hike before the Fed’s next formal meeting on March 16.
The consumer price index rose 0.6% in January, with broad based gains. The year-over-year rate rose to 7.5%, the highest level in 40 years.
In the wake of the data, Goldman Sachs said it now sees seven consecutive 25 basis point rate hikes at each of the remaining Fed policy meeting this year. The investment bank’s earlier prediction was five hikes.
Economists at Citi said that their base case is a now for a 50 basis point hike in March followed by quarter point hikes in May, June, September and December.
Marc Cabana, head of U.S. rates strategy at BofA Securities, told Bloomberg Radio that it is very likely the Fed is going to raise rates by 50 basis points in March and “who knows, maybe even 50 in May.”
