Factbox-Banking turmoil may prompt Fed to go slow on interest rate hikes

(Updates Barclays (LON:) view, money market expectations)

(Reuters) – Most Wall Street banks expect the U.S. Federal Reserve to hike the benchmark interest rate by 25 basis points at the end of its two-day meeting on Wednesday, while money markets are leaning toward a pause as worries about a global banking crisis mount.

In a quick reversal of expectations, money markets are pricing in a near 60% chance of a pause following 450 basis points of hike since last March. That followed fears of stress on the banking system from the collapse of two mid-sized U.S. lenders this month.

On Sunday, a Swiss-backed takeover of Credit Suisse by peer UBS helped calmed some fears of a contagion, but uncertainties remain over the ramifications of the deal.

A majority of economists in a Reuters poll published last week had also forecast a 25 bps hike.

Following are rate expectations from major Wall Street banks:

Bank Expectation post SVB Expectation before SVB

crisis and U.S. Feb CPI crisis

March hike Terminal March Terminal rate

(in bps) rate hike

(in

bps)

Goldman No hike 5.25% – 5.5% 25 5.5% – 5.75%

JPM 25 5% – 5.25% 25 5% – 5.25%

Citi 25 5.5% – 5.75% 50 5.5% – 5.75%

BofA 25 5.25% – 5.5% 25 5.25% – 5.5%

Morgan 25 5.125% 25 5.125%

Stanley

Barclays 25 5% – 5.25% 50 5.5% – 5.75%

NatWest No hike N/A 50 N/A

Nomura 25 bp cut N/A 50 N/A

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