The Federal Reserve stepped up the pace of hikes with a 75 bps increase; economists at HSBC now expect more rate rises ahead. What’s more, they still expect a stronger USD over the medium-term.

Federal funds target range to be 3.50-3.75% by year-end 2022

“We now expect the Fed to deliver rate hikes of 75 bps in July, 50 bps in September, 50 bps in November and 25 bps in December, bringing the federal funds target range to 3.50-3.75% by the end of 2022, (i.e., 25bp above the FOMC’s median projections implied by the dot plot) in response to elevated inflation.”

“Over the medium-term, we continue to expect the USD to strengthen further, notably against the EUR and GBP, built on the Fed’s ongoing marked tightening compared to more measured steps at the European Central Bank and the Bank of England. A slowing global economy is also likely to add further to the USD’s gains.”