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Nomura expects US Fed to raise interest rates by 50 bps in March; 5 hikes coming in year, says brokerage

videos | Feb 17, 2022 12:46 PM IST

Nomura expects US Fed to raise interest rates by 50 bps in March; 5 hikes coming in year, says brokerage

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The Fed will hike in March, but maybe not by 50 basis points. Also, the minutes don't indicate the 7 rate hikes that markets were pencilling in after Fed member St. Louis Federal Reserve President James Bullard's statements. Speaking to CNBC-TV18, Rob Subbaraman of Nomura said US Fed is gearing up for an aggressive tightening and they expect a 50 basis point hike at the March meeting and 5 more hikes this year.

Nomura expects a 50 basis point hike at the March meeting of the US Federal Reserve with five hikes overall in the year, which is 150 bps.

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“The Fed, I think is gearing up for an aggressive tightening. We actually at Nomura expect a 50 basis point hike at the March meeting, even though the consensus is 25. We expect five more hikes this year so 150 basis points all up this year,” Rob Subbaraman, Head of Global Macro Research at Nomura told CNBC-TV18.
There is a consensus that the Fed will hike interest rates in March given the inflation situation. However, it may not raise it by 50 basis points. Also the minutes don't indicate the 7 rate hikes that markets were pencilling in after Fed member St. Louis Federal Reserve President James Bullard's statements.
More importantly, the minutes show members want the Fed to aggressively contract its balancesheet, which has grown from 4.5 trillion pre COVID to 9 trillion in less than 2 years. Members don't just want the Fed to not buy bonds that mature.
They want Fed to sell the mortgage backed securities it has bought, so that the Fed owns only treasuries. This can mean not only will global interest rates rise but global liquidity will also contract significantly.
For full interview, watch accompanying video.
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