Economists at Bank of America and Goldman Sachs said they still believe that in the face of rising inflation in the country, the Fed will be forced to aggressively tighten its monetary policy, and will raise interest rates seven times by the end of this year. They also reported that by the end of 2022, the Fed's rate is likely to reach 2%, compared with 0.25% currently. Meanwhile, JPMorgan Chase economists believe that the Fed's interest rate will rise to 2% early next year.
Although Russia's invasion of Ukraine and related side effects may negatively affect the pace of global economic growth, the conflict has already caused a significant increase in the cost of commodities, which should lead to a further increase in inflation.
"In general, the reasons for the beginning of the tightening of the Fed's monetary policy have not changed. It is unlikely that the current situation around the Russian-Ukrainian conflict will force the Fed to postpone taking action, as inflation in the US is likely to continue to rise," said Praveen Korapati, strategist at Goldman Sachs.
However, money markets have a different opinion. According to the CME FedWatch Tool, the probability of the Fed raising the rate at the March meeting by 0.5% decreased to 3.7% from 33.7% a week earlier. Meanwhile, the odds of a 0.25% rate increase rose to 96.3% from 66.3% a week earlier. In general, market participants believe that the Fed rate will peak at 1.7%, while the Fed's long-term forecast assumes that the peak level will be 2.5%.