Interest rates in the United States have risen sharply recently as inflation in the United States continues to rise unexpectedly.
For a long time there was hope in the market that the Federal Reserve (Fed) would cut interest rates in the summer, and at the beginning of the year, the market priced in between 6 and 7 interest rate cuts in the US this year.
Earlier in the week, UBS warned that one should now prepare for the Fed to raise interest rates rather than cut them.
“If growth continues and inflation remains at 2.5% or higher, there is a real risk that the Fed will resume raising interest rates from the beginning of next year, reaching 6.5% by next summer,” UBS strategists wrote in a note.
In a report from Nordea, strategists Erik Bros and Joachim Bernhardsen wrote that there is a long way to go before any new interest rate hikes from the Fed.
“For now, new interest rate increases remain a long way off. The preferred tool is to keep interest rates high for longer.
Bruce and Bernhardsen point to statements by Deputy Central Bank Governor Philip Jefferson on Tuesday, where he said that if economic data indicates that inflation is more stable than previously thought, it would be right to maintain the current tightening measures for a longer period.
Moreover, they point out that central bank Governor Jerome Powell has long maintained that the criterion for lowering interest rates is increased confidence that inflation is on its way down toward the target.
Earlier this week, he said that recent data had not clearly helped increase confidence, and that it would likely take longer to achieve that confidence.
Strategists write that per The first US interest rate cut for September has now been priced in, and two rate cuts have been priced in this year.
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