Goldman Sachs and Bank of America are now predicting that the US Federal Reserve will raise interest rates three more times before the end of this year, following new data which indicates inflation may prove more persistent than anticipated as well as evidence the labor market is proving more resilient than expected.

January data released Thursday showed producer prices rising by the largest margin in seven months. Meanwhile a report by the Labor Department showed new unemployment claims fell unexpectedly last week.

Goldman Sachs economists led by Jan Hatzius said in a note to clients, “In light of the stronger growth and firmer inflation news, we are adding a 25bp (basis points) rate hike in June to our Fed forecast, for a peak funds rate of 5.25%-5.5%.” 

At the same time, based on pricing, the money markets appear to expect that by July the terminal rate will have hit 5.3%.

BofA Global Research expects the Fed’s June meeting to produce a 25 basis point hike, which will push the terminal rate up to a range of 5.25%-5.5%. It had earlier predicted the March and May meetings would each yield 25 basis point hikes.

In a client note, BofA wrote, “Resurgent inflation and solid employment gains mean the risks to this (only two interest rate hikes) outlook are too one-sided for our liking.”

Following the recent data in the US, UBS, the European investment bank, predicted the Fed would raise rates by 25 basis points in the March and May meetings, putting the Key rate at 5%-5.25%.

UBS diverges from its peers however in predicting that the Fed will ease interest rates at the September meeting this year.

Prior to the new data, J.P. Morgan had predicted a terminal rate of 5.1% by the end of June.

In a Reuters poll of economists, a majority forecasted the Fed would implement at least two more rate hikes in the coming months, with an additional risk of more beyond that. None of the polled economists expected a rate cut in 2023.