International banks expect the US Federal Reserve to raise interest rates by 75 points tomorrow

International banks expect the US Federal Reserve to raise interest rates by 75 points tomorrow
International banks expect the US Federal Reserve to raise interest rates by 75 points tomorrow

WAM / The economic circles and financial markets around the world are awaiting the decisions of the US Federal Reserve at its meeting tomorrow, Wednesday, regarding interest rates, amid expectations of raising them by about 75 basis points after increasing them 4 consecutive times during the current year, in a move aimed at limiting the repercussions of inflation, which reached unprecedented levels for decades. .

The US Federal Reserve raised interest rates during 2022, by 75 basis points last July and the same last June, in the largest increase since 1994, while raising them by about 50 basis points in May, and by 25 basis points in March of the same year.

Economists and analysts with international banks told the Emirates News Agency, WAM, that estimates suggest that the US Federal Reserve will raise interest rates by 75 basis points, or 0.75%, at its meeting tomorrow, to reach the target range between 4.25% to 4.5% by the end of the year. This year or early next year, in light of efforts to control high inflation rates.

Consumer prices in the United States recorded a sudden rise last August, as the decline in gasoline prices was offset by a rise in rent and food costs, after the Labor Department recently announced that inflation rose by 0.1% after remaining unchanged in the previous July, while annual inflation increased by 8.3%. .

Stefan Gerlach, chief economist at EFG Bank, expected US interest rates to rise more than 4% until the end of this year, noting that expectations are likely to raise interest rates by 0.75% at tomorrow’s meeting, and by 0.75% at its meeting during November, and 0.50 % in December, after which the target range will be set between 4.25% to 4.50%.

Gerlach added: “Expectations about the future of US interest rates seem reasonable, but the Fed depends in its decisions on data, and therefore if data released on inflation or the labor market shows indicators that are higher or weaker than expected, the Fed and market watchers will change their expectations as soon as possible. about interest rates.” He pointed out that in light of the decline in the annual inflation rate at a much lower rate than expected, despite the decline in gasoline prices, it has become clear that inflationary pressures have exceeded the expectations and surveys of economists, which means that the US Federal Reserve will have to set higher interest rates and maintain this high level. for longer than expected.

For his part, Jiro Jong, chief economist at Mirabaud Bank, expected the US Federal Reserve to raise interest rates by 75 points at its meeting tomorrow, based on inflation data released for the month of August, which showed a broad-based rise at the level of many major categories, noting that It is expected that the interest rate will continue to be raised until the end of this year by 50 basis points next November, in addition to another 25 basis points hike in December 2022, which means that the interest rate will range between 3.75% to 4% by the end of this year.

Jung stated that the US Federal Reserve is expected to raise interest rates at its meeting in February by 25 basis points, followed by a last rise of 25 basis points in March, followed by a temporary pause, bringing the interest rate between 4.25% to 4.50% during the remainder of the period. year 2023.

He pointed out that recent inflation data indicate that interest rates approved by central banks will maintain their high levels for a longer period, expecting interest rates to rise to higher levels, reaching a level of more than 4% early next year.

Michael Bolliger, chief investment officer for global emerging markets at Swiss bank UBS Wealth Management, sees it sensible for an additional US Federal Reserve interest rate hike of up to 100 basis points for the rest of 2022, when the Fed is still It focuses on fighting inflation and does whatever is required to bring inflation back to target ranges.

Puliger added that inflation remains a major concern for monetary policy makers around the world, noting that the current inflation dynamics do not allow a clear shift to less hawkish policy stances by central banks so far.

For his part, Devesh Mamtani, Head of Investments and Advisory Services Department at Century Financial, expected that the US Federal Reserve will raise interest rates by 75 basis points at its meeting tomorrow, which is the third in a row by the same percentage during the current year due to a slower than expected in the consumer price inflation index in the states. the United States last August.

He explained that the US Federal Reserve is seeking to control high inflation rates by raising interest rates until the US interest rates are expected to end this year at a rate of about 4.25%.

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