BofA Raises Inflation Forecasts for 2022, Expects Fed to Hike 7 Times in 2022

BofA economist Ethan Harris has made a number of changes to the bank’s base-case model for the US economy in 2022.

The economist cut 2022 GDP growth to 3.6% from 4.0% and hiked 2022 4Q/4Q core PCE inflation forecast to 3.0% from 2.6% to reflect “an even faster drop in the u-rate and longer-than-expected supply disruptions.”

“The Fed announced the final round of asset purchases in February and signaled a rate hike soon, opening the door for March. Chair Powell did his best to avoid specifics in the press conference, but the general tone had the hawkish bent we expected,” Harris wrote in a client note.

As a result of the Fed that is behind the curve, Harris now sees seven 25bp hikes this year and a peak funds rate of 2.75-3.00%.

“This should affect the economy with a lag, weighing on 2023 growth,” he concluded.

Futures are down again this morning.

By Senad Karaahmetovic | [email protected]

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