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2 Mar 2022

Goldman Sachs, Bank of America Stand by Forecasts while Traders Cut Expectations

The Index Today

Some of the prominent banks in Wall Street are standing by their financial forecasts of seven Fed-sanctioned interest hikes for this year even as traders and investors diminish bets. The banks argue that surging inflation will force the U.S. Federal Reserve to take the extreme steps.

Goldman Sachs and Bank of America anticipate the central bank to increase the benchmark to 2% by the end of the year in contrast to its present range of 0 - 0.25%. However, JPMorgan Chase & Co. believes that the benchmark will reach the 2% mark early next year.

According to Goldman Sachs strategist Praveen Korapathy, “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.”

However, traders are of a different opinion arguing against possible tightening on account of sanctions against Russia affecting global economic growth. Markets trimmed rate hike pricing from a half point to a quarter point which is expected to peak at 1.7% which falls below the Fed’s estimate of 2.5%.

©Photo: Spencer Platt Getty Images Agence France-Presse

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