Investors shouldn’t expect the Federal Reserve to pivot away from its rate-hiking campaign when it meets Thursday, according to Barclays.
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The Federal Reserve is unlikely to show any sign of pivoting away from its rate-hiking campaign when it meets this week, according to Barclays.
Investors are hoping the US central bank will ease up on tightening to help stocks to rally.
But the Fed will likely signal it could hike rates another 75 basis points in December, the bank said.
The Federal Reserve is unlikely to show any signs of pivoting away from its aggressive rate-hiking campaign when its November meeting concludes Thursday, according to Barclays.
Strategists said that the US central bank is all but guaranteed to raise interest rates by 75 basis points this week while giving itself the option to implement another jumbo-sized rate hike at its December meeting.
“The Fed seems almost assured of raising rates by 75 basis points this week,” a team led by the bank’s vice president of research Ben McLannahan said in a research note Monday.
“As such, the focus will likely be on signaling about the December meeting,” the analysts added. “Our US economists see [Fed chair Jerome] Powell emphasizing data dependence while keeping optionality for another 75 basis point hike to close out 2022.”
The Fed has already hiked interest rates by 75 basis points at three consecutive meetings in a bid to tame soaring prices, with inflation hitting 8.2% last month.
Additional outsized hikes in November and December would lift the US central bank’s federal fund rates to between 4.75% and 5%.
Powell has tended to focus on the Fed’s data-driven approach in press conferences, with inflation showing few signs of slowing and a white-hot labor market giving the central bank scope to hike rates aggressively without crushing employment statistics.
Barclays economists expect Friday’s non-farm payrolls data to show the US economy added 175,000 jobs in October.
That would represent a fall from September’s 263,000 figure — but “still be strong enough to keep the Fed on the hawkish side”, McLannahan’s team said.
Barclays’ prediction that the Fed will carry on hiking rates aggressively until the end of the year clashes with some other major Wall Street names who have turned more bullish in recent weeks.
Morgan Stanley’s top stock picker Mike Wilson said Monday that he’s expecting a pivot “sooner rather than later“, causing him to reiterate his forecast for the S&P 500 to rally 6.4% from its current level.