Global banks place bets on how many US Fed rate increases are in store for 2022

Major investment banks have pencilled in a strong run of interest rate increases for 2022 after hotter-than-expected inflation data piled pressure on the US Federal Reserve to take a firmer stand against soaring prices. Data last week showed US consumer prices rose at their fastest pace since the early 1980s, fuelling market speculation for a hefty 50-basis-point hike from the Fed's March 15-16 meeting.

The current Fed fund effective target is 0-0.25 per cent. As the Fed prepares to raise pandemic-era rates, here are the estimates from major global investment banks on how far and fast rates will rise: JP Morgan, the biggest bank in the US, raised its Fed call to seven 25-bp rate hikes from five previously, for a total of 175 bps of tightening this year.

Fellow US financial major Morgan Stanley now expects the Fed to deliver six 25-bp hikes this year. It had previously forecast 125 bps of tightening via four 25-bp hikes plus a 25-bp fed funds equivalent run-off of the Fed's balance sheet.

UBS, the world's largest private bank based in Switzerland, sees 150 bps of tightening this year via six consecutive quarter-point moves from March through November. It had previously forecast 25-bp increases in March and June, then "a potential shift towards an every meeting hike pace". France's BNP Paribas, the country's largest lender, projects six increases of 25 bps this year starting in March, resulting in a cumulative 150 bps of tightening.

Citi, the third-largest bank in the US, now expects 150 bps of tightening this year, starting with a 50-bp move in March, followed by four, quarter-point increases in May, June, September and December.

Switzerland's Credit Suisse now expects the Fed to hike a cumulative 175 bps this year, beginning with a 50-bp increase at the coming March meeting. Societe Generale, France's third-biggest bank, sees five rate hikes of 25 bps this year, starting in March.

New York-based Goldman Sachs said it is raising its forecast to include seven consecutive 25-bp rate hikes at each of the remaining Federal Open Market Committee meetings in 2022 from a previous expectation of five increases. BofA Global Research expects the Fed to increase rates by 25 bps at each of this year's remaining seven meetings, unchanged from its previous outlook. However, it said there is a risk of a 50-bp hike in the March meeting.

London's HSBC, Britain's largest lender, projects the Fed to roll out a 50-bp increase in March and four more quarter-point rate rises in 2022. Germany's Deutsche Bank, the country's biggest financial institution, expects the Fed to call a 50-bp increase in March plus five more 25-bp hikes in 2022, with raises at all but the November meeting.

Barclays, one of the UK's largest lenders, now sees the Fed to raise rates by 25 bps five times this year, up from three increases it forecast earlier.