(Reuters) – The U.S. Federal Reserve may hike interest rates to nearly 6%, BofA Global Research said, as strong U.S. consumer demand and a tight labor market would force the central bank to battle inflation for longer.The number is higher than a peak of 5.4% by September that traders are currently pricing in.”Aggregate demand needs to weaken significantly for inflation to return to the Fed’s target. Further supply-chain normalization and a slowdown in the labor market will help, but only to a degree,” said BofA in a noted dated Feb. 27.”Moreover, these processes are taking longer than we and markets were expecting,” it added.BofA’s hawkish stance comes after it recently added expectation for another quarter basis-point hike in June following similar moves in March and May, for a peak rate expectation of 5.25%-5.5%.The brokerage expects the U.S. economy to tip into recession by the third quarter of 2023.(Reporting by Siddarth S in Bengaluru; Editing by Shailesh Kuber)
