The U.S. Federal Reserve is likely to hike interest rates to at least 6.5% if the economy does not enter a mid-year recession, according to TS Lombard Chief U.S. Economist Steven Blitz.
"There's going to be a recession, and the Fed is going to push the point and they're gonna get the unemployment rate to at least 4.5%, in my guess it probably ends up getting up to as high as 5.5%," Blitz said.
"Either you get a recession mid-year and the top rate is 5.5% or there is enough momentum, the January numbers are right, and the Fed keeps going and if they do keep going, my guess is that the Fed's going to get up to 6.5% on the funds rate before things really start to slow down and reverse," he said.
The February jobs report is due from the Labor Department on Friday and the February CPI reading is slated for Tuesday.Powell's bearish commentary implies a 50 bps hike in March is possible, says Gradient's Jeremy BryanIn the research note announcing its increase to the terminal rate forecast, Goldman Sachs said that it expects the median dot in the March Summary of Economic Projections to rise by 50 basis points to 5.5-5.75% regardless of whether the FOMC opts for 25 or 50 basis points.
Goldman also forecasts a firm 0.45% monthly increase in core CPI in February, and said that the combination of likely data creates "some risk that the FOMC could hike by 50bp in March instead of 25bp."
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