The brokerage expects the U.S. economy to tip into recession by the third quarter of 2023. (Reporting by Siddarth S in Bengaluru; Editing by Shailesh Kuber)
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%.
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