Wall Street Banks Are Divided Over Size of Fed’s Next Rate Hike

  • Bloomberg
  • Stock Market News
Wall Street Banks Are Divided Over Size of Fed’s Next Rate Hike
Credit: © Reuters

(Bloomberg) -- Wall Street’s biggest banks aren’t declaring an end to the Federal Reserve’s interest-rate increases, though they differ over the size of the next hike in September.

The Fed increased its benchmark rate on Wednesday by 75 basis points for a second straight meeting and Chair Jerome Powell said even tighter monetary policy was likely. He said a similar increase in September could be appropriate depending on incoming data, though the guidance was less explicit than it was following other recent meetings.

Stock investors appeared to celebrate as they decided Powell was signaling a pivot toward slowing or stopping, a conclusion many seasoned Fed watchers balked at.

Economists at Citigroup Inc (NYSE: C ) and Wells Fargo (NYSE: WFC ) even see another 75 basis-point salvo in September. While those at Goldman Sachs Group Inc (NYSE: GS ) and JPMorgan Chase & Co. (NYSE: JPM ) see a downshift to a 50 basis-point increase then, they still don’t see the Fed holding back for now.

Here’s a rundown of what big banks are predicting:

Bank of America

  • Fed will increase its benchmark by 50 basis points in September
  • It will then shift to 25 basis-point hikes in November and December
  • Officials will then pause given rates will be in restrictive territory

Citigroup

  • Fed will increase its benchmark by another 75 basis points in September
  • It will lift rates to 4% by the end of the year with probably more hikes to come in 2023

Goldman Sachs

  • Fed will raise rates 50 basis points in September
  • It will follow that with two hikes of 25 basis points in November and December
  • Rates will peak at 3.25%-3.50%

JPMorgan Chase

  • Fed will hike by 50 basis points in September
  • It will increase the benchmark by 25 basis points twice more this year
  • It will pause at the end of the year

Morgan Stanley

  • Fed will shift by 50 basis points in September
  • Rates will peak around 3.5%-3.75% at the end of this year
  • Policy makers will cut by 25 basis points in December 2023

Wells Fargo 

  • Another 75 basis-point hike will come in September

What Bloomberg Economics Says...

“Based on data as of the July FOMC, we expect a 50 basis-point hike in September.”

©2022 Bloomberg L.P.

© Bloomberg. Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., on July 27, 2022.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100