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HSBC No Longer Believes the Fed Will Stand Pat This Year, Now Predicts Two Rate Hikes

HSBC expects the Federal Reserve to raise interest rates by 0.25 percentage points in September and December, changing its previous assessment that rates would remain unchanged. Ryan Wang, HSBC's U.S. economist, stated in a report that following the August employment report and consumer price index (CPI) data, both of which exceeded HSBC's expectations, the bank now anticipates that the Federal Open Market Committee (FOMC) will vote to support a 25 basis point rate hike at its meeting on September 15-16. This would raise the federal funds target rate range to 3.75%-4%. "We believe the new dot plot from the FOMC may indicate a median forecast of 4.125% by the end of 2026, suggesting that (at least many policymakers) are inclined to implement consecutive 25 basis point hikes at the meetings on October 27-28 and December 8-9," Wang added. Given the strong momentum of U.S. economic growth, HSBC expects that after rate hikes this year, there will not be a swift shift to rate cuts. (Bloomberg)

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