Deutsche Bank Predicts Three Consecutive Fed Rate Hikes
The market has completely ruled out the possibility of a rate hold at the December meeting: the rate hike is already fully priced in
Deutsche Bank expects the Fed to raise interest rates at its meetings in December, January, and March / Photo: Markus Mainka / Shutterstock.com
Following the release of data showing an acceleration in consumer inflation in October, economists at Deutsche Bank added a January interest rate hike to their forecast. “We now expect the Fed to raise rates by 25 basis points at each of its next three meetings—in December, January, and March. As a result, the federal funds rate range will reach 4.5–4.75%,” MarketWatch quotes a note from Deutsche Bank’s chief U.S. economist, Matthew Luzzetti.
Even before the inflation data was released, influential Federal Reserve Board member Christopher Waller stated that the U.S. central bank should raise rates by at least 25 basis points next month, even if price growth had slowed in October, according to Reuters. And if inflationary pressures intensify, the central bank should consider a 50-basis-point hike, he said. The Consumer Price Index (CPI) rose 0.4% in October compared with the previous month, exceeding Wall Street forecasts.
According to a Deutsche Bank economist, a second rate hike of 25 basis points in January is more likely than a 50-basis-point increase in December. This is partly because many Federal Reserve officials favor a gradual tightening of monetary policy. More aggressive action can be expected if the Fed concludes that the cumulative rate hike should significantly exceed 100 basis points, Luzzetti added.
According to the CME FedWatch tool, traders have fully priced in a December rate hike. The probability of a minimal rate hike stands at 82%, while the chance of a larger hike is estimated at 18%.
This article was AI-translated and verified by a human editor
