Wells Fargo expects sharp price increases in the US to cool rampant inflation

Wells Fargo expects sharp price increases in the US to cool rampant inflation

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(Reuters) – Wells Fargo Wall Street Bank (NYSE) economists said in a note on Tuesday that they expect a sharp rise in interest rates from the Federal Reserve due to the resilience of the US economy and the central bank’s growing determination to de-inflate.

They had earlier expected a 100 basis point hike between now and early next year, but now expect the FOMC to raise rates by about 175 basis points.

The Fed has raised interest rates by 300 basis points so far this year and sees the rate hike cycle ending in 2023 at 4.50%-4.75% as it struggles to quell the highest inflation streak since the 1980s.

Analysts expect the target range to reach 4.75%-5.00% by the first quarter of 2023, including a 75 basis point increase at the November 2 meeting and a 50 basis point increase at the December 14 policy meeting.

“The economy is showing signs of resilience, which requires further monetary tightening to slow growth enough to bring inflation back toward the Fed’s 2% target,” said analysts led by chief economist Jay Bryson.

“Our updated Fed Funds rate forecast also reflects the Fed’s apparent willingness to do ‘whatever it takes’ to rein in inflation.”

Federal funds futures suggest a 70% chance of a 75 basis point hike in November and a peak of about 4.5% at the benchmark rate in early 2023. [FEDWATCH]

Last week, Goldman Sachs (NYSE :), Barclays (LON 🙂 A group of investment banks also raised their estimates of US policy rates after the Fed’s hardening message on September 21st.

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Analysts at Wells Fargo added that the FOMC will not cut interest rates at the first sign of economic weakness. They expect a shift in Fed policy only at the end of next year.

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