Make Kitco Your Homepage

Fed might raise policy rates to 6% - BofA

Kitco News

Feb 28 (Reuters) - The U.S. Federal Reserve may hike interest rates to nearly 6%, BofA Global Research said, as strong U.S. consumer demand and a tight labor market would force the central bank to battle inflation for longer.

The number is higher than a peak of 5.4% by September that traders are currently pricing in.

"Aggregate demand needs to weaken significantly for inflation to return to the Fed's target. Further supply-chain normalization and a slowdown in the labor market will help, but only to a degree," said BofA in a noted dated Feb. 27.

"Moreover, these processes are taking longer than we and markets were expecting," it added.

BofA's hawkish stance comes after it recently added expectation for another quarter basis-point hike in June following similar moves in March and May, for a peak rate expectation of 5.25%-5.5%.

The brokerage expects the U.S. economy to tip into recession by the third quarter of 2023.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.