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OptionsIn a research report released on March 20, Bank of America Merrill Lynch's US economist Aditya Bhave pointed out that the Federal Reserve needs to meet at least three conditions simultaneously to raise interest rates: a stable labor market (unemployment rate below 4.5%), further increases in core inflation (core PCE exceeding 3.2%), and Powell remaining as Chairman.
What Conditions Are Needed for the Fed to Raise Interest Rates?
With rate cut expectations almost fully priced out by the market, investors are turning their attention to another possibility: could the Federal Reserve restart interest rate hikes? Economists at Bank of America suggest the threshold is extremely high, but not impossible. The triple conditions for a Fed rate hike are: unemployment rate below 4.5%, core PCE exceeding 3.2%, and Powell remaining as chairman. All three conditions are indispensable. The most likely scenario for them to occur simultaneously is a mild Iran shock with oil prices hovering between $80 and $100. The earliest possible rate hike would be in June
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