Analysts are now seeing a terminal rate of 4.50-4.75% by next year with another 75bp hike in November, followed by a 50 bp in December and another 25bp hike in February, after the US Federal Reserve raised interest rate by a three-quarter percentage point in September for its third consecutive time for big rate hikes.
Six hawkish dot plots now see Fed funds rate reaching 4.75% in 2023, compared to the highest dot of 4.4% by the end-2023 saw in June. The most hawkish dot at that time belonged to Neel Kashkari, who had previously been one of the central bank’s most dovish members.
In contrast to the consensus for 4.50-4.75% range, the Bank of America stated that it now expects hikes of 75bp in November, 50bp in December, followed by two 25bp rate hikes by March of next year.
This forecast raises its new terminal target range to 4.75-5.0%, up from 4.0-4.25% previously.
Goldman Sachs said that Fed’s path likely corresponds to a 75bp hike at the November meeting, a 50bp hike in December, and a 25bp hike in January, which is above its current forecast.
Meanwhile, Citigroup said that it is adding 25bp of cumulative hikes to its projections and now expects a 75bp hike in November, 50bp in December, and 25bp in February for a terminal rate of 4.5-4.75%.