The US Federal Reserve could raise interest rates to nearly 6%, Bank of America Global Research said, as the monetary policy body continues to combat inflation.
BofA Global Research pointed to high US consumer demand and a tight labor market would force the central bank to continue to raise rates, even higher than the 5.4% September peak that traders are currently pricing in, the firm said.
"Aggregate demand needs to weaken significantly for inflation to return to the Fed's target,” BofA said in a note Monday. “Further supply-chain normalization and a slowdown in the labor market will help, but only to a degree.”
BofA previously added expectations of another 0.25 basis point increase in June following similar moves in March and May, which would reach a peak rate expectation of 5.25%-5.5%.
Notably, the firm expects the US to enter a recession by the third quarter.
Bank of America isn’t alone in its interest rate projections.
Last week, JPMorgan Chase & Co (NYSE:JPM) chief executive Jamie Dimon said US interest rates could reach 6% in an interview with CNBC.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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