The U.S. Federal Reserve is expected to raise the federal funds rate during its next meeting on Wednesday and JPMorgan economist Michael Feroli believes that rising inflation will push the Fed to increase the rate by 75 basis points (bps). Last week, CME Group data indicated the market priced in a 95% chance that the U.S. will see a 50 bps rate hike this month. Although, while some expect a hawkish Fed, some believe the U.S. central bank may act dovishly if markets get worse.
We anticipate two more rate increases in 2023 to 3.75-4%, followed by one cut in 2024 to 3.5-3.75%. We anticipate a 50bp increase in September, followed by 25bp increases in November and December, for an unchanged terminal rate of 3.25-3.5%. We expect the median dot to show 3.25-3.5% at end-2022.