- The Federal Reserve will announce another interest rate hike Wednesday as inflation soars.
- Wall Street agrees the central bank will be aggressive, but there's no consensus on how big the hike will be.
- Here's what eight top Wall Street banks expect to happen today.
The Federal Reserve is set to announce an interest rate raise on Wednesday to combat 41-year-high inflation, but experts are conflicted on how aggressive the rate hike will be.
Some analysts say that the Fed could be extremely aggressive in the move, with consumer prices soaring. For example, "Bond King" Jeff Gundlach urged the Fed to immediately raise interest rates to 3%, while Bill Ackman called for rapid-fire hikes of 100 basis points.
Last month, policymakers raised the target range for the federal funds rate a half point to 0.75% to 1%. Bond yields have soared in recent days on expectations of a more hawkish Fed. On Tuesday, the 10-year Treasury yield hit an 11-year high of 3.48%.
While there isn't a consensus among the top banks on Wall Street, most have put forth predictions. From Goldman Sachs to Citigroup, here's what top firms expect the central bank to do today.
Goldman Sachs: 75 basis points
The Wall Street giant warned the chances of a US recession are rising, and it expects the Fed to raise rates by 75 basis points at the next two meetings.
Additionally, Goldman's analysts expect the Fed's target federal funds rate to peak at 3.25-3.5%, around 50 basis points below what the rest of the market expects.
Jefferies: 75 basis points
Jefferies upped its call from 50 basis points after the May inflation reading hit a 41-year high.
"[We] have increased our Fed rate call to 75bps from 50bps at this meeting as we not only think the Fed SHOULD hike but that they actually WILL hike by that order of magnitude," Brad Bechtel, the global head of FX at Jefferies, said in a note released Monday.
Barclays: 75 basis points
Economists at Barclays echoed Jefferies and Goldman Sachs' predictions.
"[W]e think the US central bank now has good reason to surprise markets by hiking more aggressively." Still, "we realize it is a close call and that it could play out in either June or July," analysts wrote in a note after the release of the consumer-price index for May.
JPMorgan: 75 basis points
JPMorgan's chief US economist wrote in a Monday note that an increase of 100 basis points is also a "non-trivial" risk, Bloomberg reported.
Deutsche Bank: 75 basis points
Analysts said in a report on Tuesday that they expect 75-point hikes both today and in July, highlighting that there's a "need for speed" in battling inflation.
Bank of America: 50 basis points
BofA expects two hikes of 50 basis points each at the Wednesday and July meetings, respectively, according to Reuters.
Citi: 50 basis points
Similarly, Reuters reported that Citi analysts expect a 50-basis-point rate hike Wednesday.
Morgan Stanley: 50 basis points
Morgan Stanley's chief Asia economist and global head of economics, Chetan Ahya, predicted Monday that the Fed will to make 50-basis-point rate hikes in the next two meetings, including Wednesday's meeting.
