The Most Important Number of the Week Is Seven
Wall Street’s predictions for the number of Fed rate increases are just noise. Keep an eye on how the economy is truly doing.
We’ll see your six and raise you one.
Photographer: Victor J. Blue/Bloomberg
Nobody plays the “Can You Top This?” game better than Wall Street. No sooner does one strategist come out with an out-of-consensus forecast of X than another comes out with a forecast of X plus 1. It’s not hard to understand why strategists are drawn into this one-upmanship. In this era of information overload, strategists need to stand out from the crowd somehow. As long as the calls end up being directionally correct, even if the magnitude is off, then that’s enough to declare victory.
This game played out in all its glory this week, with strategists ratcheting up their estimates for the number of times the Federal Reserve will raise interest rates this year. First it was three, then a bunch said four, some then said five, a handful then said six, and then came the news Friday that the economists at Bank of America Corp. forecast seven increases. Given the central bank’s predilection for raising rates in increments of a quarter percentage point, that means the Fed’s target rate would rise from 0.25% to 2% by the end of the year, or an increase at every monetary policy meeting left in 2022. The weighted average estimate of more than 60 economists surveyed by Bloomberg is for a fed funds rate of 1.15%.