Bank of America is anticipating a 75-basis point rate hike from the Federal Reserve next week as August’s CPI print overshadowed the favorable trends in producer and import prices.
BofA came out with an investor note and stated: “We now expect a 75bp and 50bp hike in September and November, followed by 25bp hikes in December and February, bringing the terminal rate to 4.00-4.25%.”
BofA added: “We think the Fed will signal a terminal funds rate of 4.0-4.25% early next year, 37.5bp higher than in June. We expect the FOMC statement to say that monetary policy will be moving into restrictive territory and the committee expects it to remain there “for some time”, similar to the tone of Chair Powell’s remarks at Jackson Hole.”
The next Fed’s next meeting is scheduled for Sept. 21, and Wall Street is now pricing in a 20% chance that it will see a 100 basis-point hike compared to an 80% chance the central bank will announce a 75 basis-point rate hike.
Ahead of the FOMC announcement the S&P 500 along with its mirroring ETFs (NYSEARCA:SPY), (NYSEARCA:VOO), (NYSEARCA:IVV) have now erased the previous week’s gains and look to open near the 3,900 level.
Moreover, stock index futures point to a decline at the start Friday with market set to make it four down weeks out of the last five.