The Federal Reserve might increase interest rates by 50% in Mai, June, July, and September.
The Federal Reserve’s policies remain a concern for traders and economists due to the high inflation pressure and the market downturn. The City Group bank experts issued their new adjusted forecast this week.
In December 2021, the experts of the city bank predict that the Federal Reserve will increase interest rates by a total of 200 basis points combined.
However, things have changed due to the war’s consequences on oil and precious metal prices. As of Friday, gold prices got back to their high trend direction. Now gold is worth $1953 per ounce. Given its increasing momentum, it will likely hit $2000 per ounce in the next few weeks.
Oil Wit had increased by 0.98% to trade for $113 per barrel, Brent oil is now worth $120 per barrel. The West Texas Intermediate and Brent crude oil prices have just reached their highest levels in three weeks. Oil prices increased yesterday as a result of a missile attack on the company Aramaco in Ukraine.
The US dollar and the euro have taken another hit after Russia’s president announced new rules requiring all oil transactions with Russia to be conducted in Russian currency. The U.S. and its allies are now considering the possibility of sending peacemaker troops to Ukraine. Putin still didn’t change its discussion on stopping the war unless Ukraine agreed to all of his conditions.
The Federal Reserve will face profound inflation pressure, and the housing market is already suffering from the consequences. Homeowners who sell can’t find buyers, and builders can’t afford the high cost of building materials.
Given the current date and figures, FED policymakers may become more aggressive in the next round of rate hikes. The second hike is expected in the early weeks of May, or during the third week.
The city bank experts forecast that May, June, July, and September interest hikes will be around 50%. At the Federal Reserve chairman’s Monday press conference, he said that he was willing to fight inflation at any cost. Experts translated his words and predicted that four 50% interest rate hikes would sink the S&P 500 and slow the economic recovery cycle.
Mortgage rates increased to a high record for the first time since 2019. The U.S. treasury rose to 2.29% for the first time since 2019. On top of that, a 50 basis point interest hike will affect the housing market enormously.
As for October and December interest hikes, the lifting rate will return to 25 basis points, so by the end of the year, there will be seven official interest hikes for a total of 275 basis points.
Compared to the first forecast of the city bank, the new forecast increased by 75 basis points.
As Goldman sash predicts, there will be seven hikes this year. But the amount of the hike depends on the economic variant that might occur in the next 9 months.
Furthermore, there is a strong possibility of additional interest rate increases in 2023 and 2024, but all of this is still speculative at this time.
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