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Citi now sees four consecutive 50 bps increase in interest rates

The U.S. Federal Reserve could increase interest rates by 50 basis points consecutively in its next four policy meetings, says Citi’s Veronica Clark.

Clark’s remarks on CNBC’s ‘Squawk Box’

Her forecast comes more than a week after Jay Powell confirmed that the central bank would opt for a 50 bps increase in May if it sees the need to do so. On CNBC’s “Squawk Box”, Clark said:

Market’s come to expect 50 bps in May and we’re not seeing signs that inflation data will slow down in any material way after that. We have supply disruptions, rising commodity prices; so, if you’re doing 50 bps in May, why would you slow down after that?

U.S. inflation hit a fresh 40-year high of 7.9% in February. Data for March is expected to be out by mid-April.

Clark’s view on the prospect of a recession

According to Clark, a broader jump in interest rates over the next four meetings has the potential to effectively capture inflation. The Citi economist added:

50 bps at next four meetings gets you to the long-term nominal neutral rate. We expect then the Fed slows back to 25 bps. The Core PCE Inflation is at about 6.0%, we think that slows to 4.50%. So, by year-end, it’s not close to target, but it’s at least moving in the right direction.

Clark doesn’t see a threat of recession at this point in time as indicators other than the yield curve continue to suggest economic strength.

The post Citi now sees four consecutive 50 bps increase in interest rates appeared first on Invezz.

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