Interest rates

Federal Reserve to raise interest rates for 9 straight meetings: JPMorgan

  • JPMorgan now expects the Federal Reserve to raise interest rates for nine consecutive meetings.
  • Bank analysts also said rapidly rising interest rates are the biggest danger to markets.
  • The Fed is expected to start raising rates in March as it faces the highest inflation in 40 years.

JPMorgan now expects


Federal Reserve

to raise interest rates for nine consecutive meetings as the central bank grapples with the highest inflation in 40 years.

Central banks raising interest rates faster than investors expected now pose the biggest threat to otherwise healthy markets and economies, bank analysts said in a note over the weekend.

Analysts, led by chief economist Bruce Kasman, said they now believe the Fed will raise rates by 25 basis points (0.25 percentage points) at every meeting through March 2023, or nine total increases.

The federal funds target rate – the Fed’s main interest rate – is currently at an all-time high of between 0% and 0.25%. Nine consecutive increases of 25 basis points would take the rate from 2.25% to 2.5%.

Much of Wall Street expects the Fed to start raising interest rates in March, with most analysts expecting five or six hikes in 2022. Rising interest rates make borrowing more expensive and aims to reduce spending and demand, hoping that inflation will be cooled.

Read more: A BNY Mellon Wealth Management investment manager explains why he expects stocks to rebound 8-10% this year despite recent volatility – and shares 3 investment strategies to excel in the current mid-term bull market cycle

JPMorgan said recent inflation reports were significantly higher than expected. This has caused some thinking among economists at the bank, who no longer expect price growth to slow this quarter.

“These developments align with hawkish signals from central banks, and we have accelerated projected policy rate normalization trajectories in response,” Kasman and his colleagues wrote.

However, they said faster and more sustained central bank action posed a danger to markets and economies.

“We believe the risk that central banks will change and perceive the need to generate slow growth – and the corresponding impact on global financial conditions – is now the most significant threat to an otherwise healthy global backdrop.”

Global equities have already fallen sharply in 2022, largely because investors have quickly revised their expectations upwards for the number and pace of Fed interest rate hikes. The S&P 500 was down 8.8% for the year as of Friday’s close, with the Russian-Ukrainian crisis causing more


volatility

.