Poll: Wall Street banks see 2 more key rate hikes this year

NEW YORK: Wall Street’s top banks see two additional interest rate rises this year from the United States Federal Reserve (Fed) and most expect at least three more next year, a Reuters poll showed on Wednesday.

These so-called primary dealers, or banks that do business directly with the Fed, were divid- ed, however, on when they expect the Fed to outline its plans for trimming back its US$4.4 trillion (RM19.5 trillion) bond portfolio.

Half the respondents see that happening by the end of this year, and the other half expect the Fed to wait until next year or later to detail its balance sheet resolution plan.

Following that announcement, 16 of the 18 primary dealers that responded to the poll said they expected the rate to rise to between 1.25 and 1.5 per cent by the end of this year. Two saw the rate reaching to 1.5 to 1.75 per cent, which would indicate three more hikes.

Looking into next year, 13 of 16 dealers offering a forecast said the Fed would hike at least three times next year, with a median year-end forecast of between two and 2.25 per cent. Eight predicted three hikes and five said the Fed would accelerate its pace to four increases next year.

The results were largely in step with a poll of the same group of banks after last Friday ’s stronger-than-expected report on the US employment situation.

It did mark a notable change from a poll one month ago when most dealers still expected just two rate hikes this year, with none of them then forecasting a move at the Fed’s meeting this month. Reuters