Fed's resiliency, resolve to wring out inflation will spur more rate hikes

Wall Street bank economists said on Tuesday that the Federal ReserveFederal Reserve's resiliency and the central bank's increased resolve to wring out inflation will cause steeper rate hikes by the Federal ReserveFederal Reserve.

The Fed has aggressively hiked interest rates by 300 basis points so far this year and sees its rate hiking cycle end 2023 at 4.50% -- 4.75% as it struggles to beat the highest inflation since the 1980 s.

The target range is expected to hit 4.75% -- 5.00% by the first quarter of 2023, including a 75 bps hike at the Nov. 2 meeting and a 50 bps raise at the Dec. 14 policy meeting.

The economy is showing signs of resiliency, which will necessitate more monetary tightening to slow growth in order to bring inflation back to the Fed's target of 2%, said the analysts, led by chief economist Jay Bryson.

The Fed's willingness to do whatever it takes to rein in inflation is apparent in our updated forecast for the fed funds rate. The Fed funds futures have a 70% chance of a 75 bps hike in November and a peak of around 4.5% in early 2023, according to the Fed funds futures. Following Fed's hawkish message on Sept. 21st, Goldman Sachs, Barclays and a bunch of investment banks raised their estimates for U.S. policy rates.

Wells Fargo said that the FOMC will not cut rates at the first sign of economic weakness. They expect a U-turn in the policy of the Fed toward the end of next year.