HSBC: “Fed Will Keep Interest Rates Unchanged for Two Years”

HSBC reiterated its expectation that the Fed will keep interest rates stable for the next two years.

The bank announced that the Fed kept its policy interest rate unchanged at 3.50%-3.75% at its March meeting and indicated a “wait-and-see” approach in its decision statement.

According to HSBC, persistent inflationary pressures and rising geopolitical risks continue to create uncertainty in the Fed’s monetary policy outlook. The sharp rise in energy prices, in particular, is cited as increasing inflation risks, while risks to the labor market have somewhat decreased.

The bank maintains its view that, under current conditions, the Fed will not change interest rates in 2026 and 2027. HSBC also noted that volatility in energy prices and geopolitical developments could support safe-haven demand, contributing to a strong US dollar.

On the other hand, according to CME’s FedWatch data, markets are largely pricing in a scenario where interest rates remain unchanged. Accordingly, the probability of the Fed raising interest rates by 25 basis points in April is calculated at 6.2%, while the probability of interest rates remaining at their current level is at 93.8%.

*This is not investment advice.