Wall Street split over the Fed – WORLD

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While there is consensus that the Fed will raise interest rates by 50 basis points to a range of 4.25-4.50% in December, economists are divided over whether the bank will fight high inflation or act on the risk of a recession.

Mixed expectations from the summit

Nomura Holdings expects interest rates to peak at 5.75%, with Citi 5.50%, Goldman Sachs, Wells Fargo, Bank of America, Barclays 5.25%, JP Morgan Chase, Bloomberg Economics, Deutsche Bank and UBS 5%, Morgan Stanley expects it to be 4.75%.

There are those who are waiting for a discount, and those who are not.

Economists at UBS Group expect the total contraction to be 175 basis points by the end of next year, while Deutsche Bank’s is 100 basis points. Nomura and Barclays expect a 75 basis point decline by the end of 2023. Morgan Stanley expects a 25 basis point cut, Goldman and Wells Fargo expect rates to remain flat at 5.25% at the end of the year, and JP Morgan at 5%.

Reversal in the Volcker era

In 1984, the Fed, led by Paul Volcker, reversed monetary policy in 6 weeks and went from rapid tightening to a cycle of cutting more than 500 basis points. Goldman Sachs economists shared a note last week that the Fed would raise interest rates to 5.25%, and by the end of next year it will be so.” ,” he said.

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