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Predictions for US interest rate increases go wild

By Kevin Donovan

19:12, 1 February 2022

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Federal Reserve Bank of New York building in Manhattan
Six bank research groups predict 5.3 Fed rate hikes – Photo: Capital.com

With US Federal Reserve Chairman Jerome Powell stating publicly plans to begin a tightening monetary policy throughout the remainder of 2022, and possibly into 2023, investment bank rate hike predictions vary wildly.

The following is a list of how many rate hikes various Wall Street research groups predict, from the most to least hawkish outlook:

· Bank of America – Rate Hikes: 7

“The Fed has all but admitted that it is seriously behind the curve. With that said, the markets are doing the Fed's job of tightening financial conditions without an actual hike.”

· JPMorgan – Rate Hikes: 7

“Central banks will be challenged to calibrate policy to contain inflation while prolonging the expansion. We believe central banks can meet this challenge, but policy adjustments will prove larger than markets currently expect.”

· BNP Paribas – Rate Hikes: 6

“We read Fed Chair Powell's comment that this cycle is different from the previous one as an indication that the Fed's bias is for a steeper tightening than the markets and we had envisaged.”

US100

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Long position overnight fee -0.0182%
Short position overnight fee 0.0071%
Overnight fee time 22:00 (UTC)
Spread 1.8

BTC/USD

23,360.45 Price
-0.290% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 60.00

XRP/USD

0.41 Price
+0.370% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00332

Oil - Crude

73.46 Price
-3.460% 1D Chg, %
Long position overnight fee -0.0223%
Short position overnight fee 0.0065%
Overnight fee time 22:00 (UTC)
Spread 0.03

· Goldman Sachs – Rate Hikes: 5

“We see a risk that the FOMC will want to take some tightening action at every meeting until the inflation picture changes.”

· Morgan Stanley – Rate Hikes: 4

“If they need to hike fast, they will. The Fed is showing urgency and being flexible.”

· Barclays – Rate Hikes: 3

“With reserves balances over $4trn and nearly $1.5trn in (liquidity), we expect it will be difficult for short-term interest rates to trade much above the interest rate floor.”

Some of the bank quotes were first reported by SeekingAlpha.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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