(Reuters) – Bank of America economists said on Friday that they expect the Federal Reserve to hike rates by 25 basis points seven times this year, beginning in March, as the U.S. central bank battles persistent inflation.
“The Fed has all but admitted that it is seriously behind the curve,” the economists said in a report, adding that the aggressive tightening “should affect the economy with a lag, weighing on 2023 growth.”
The bank raised its 2022 fourth quarter forecast on the core personal consumption expenditures (PCE) index to 3.0%, from 2.6%, saying that “an even faster-than-expected drop in unemployment and longer-than-expected supply disruptions mean more inflation.”
It also cut its 2022 outlook for gross domestic product to 3.6%, from 4.0%, noting that “a combination of supply and demand factors points to weaker growth this year.”
The Fed on Wednesday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.
Bank of America said it now expects a peak fed funds rate of 2.75% to 3.0%.
(Reporting By Karen Brettell; Editing by Chizu Nomiyama)
