BofA, UBS cut terminal rate hikes after Fed hints at pause

Reuters- Bank of America and UBS trimmed their terminal rate expectations on Thursday after the U.S. Federal ReserveFederal Reserve hinted it might pause its rate-hike campaign due to the turmoil in the banking sector.

The Fed's benchmark rate was in the range of 4.75 - 5% after a quarter point hike on Wednesday.

After the collapse of two mid-sized U.S. banks and a Swiss-backed takeover of the troubled global bank Credit Suisse, a minority of market participants flagged the possibility of a pause in hikes.

BofA analysts said that the bank lending standards could be tightened because of the tightening of the bank lending standards.

BofA and UBS have no longer been expecting an interest rate hike in June and see the Fed funds rate peak in May at 5 -- 5.25% and 5.25 -- 5.5%, respectively.

Goldman Sachs, which was expecting the Fed to pause on Wednesday, maintained its terminal rate forecast in the 5.25 -- 5.5% range, but now sees rates peaking in June instead of July.

The banking crisis could cause a credit crunch with significant implications for the economy, which could slow down even more this year than previously thought, according to Fed officials.

Money markets, which had priced in a terminal rate close to 6% by September, now see the rate peaking at 4.9% by May.