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Morgan Stanley sees Fed hiking U.S. rates in March

NEW YORK (Reuters) - Morgan Stanley economists said on Thursday they expected the Federal Reserve will raise U.S. interest rates by a quarter point to a range of 0.75-1.00 percent at its upcoming policy meeting in less than two weeks.

The U.S. central bank would increase its interest rate target range two more times later in 2017 after a possible hike later this month, they said in a research note.

They forecast four rate hikes in 2018.

The economists' latest view on a March rate increase followed remarks from New York Fed President William Dudley who said on CNN on Tuesday that the case for a rate hike has become "a lot more compelling."

This notion from Dudley, one of the most influential U.S. central bankers, has been echoed by a number of Fed officials in the past 48 hours.

On Thursday, Fed Governor Jerome Powell told CNBC the case for a March rate increase has come together with domestic inflation nearing the Fed's 2 percent goal.

The core rate on the personal consumption expenditure, the Fed's preferred inflation gauge, showed a year-over-year increase of 1.7 percent in January, the Commerce Department said on Wednesday.

Morgan Stanley economists said the Fed will likely continue its pace of rate increases with inflation remaining on its upward path and looser financial conditions stemming from the record run on Wall Street and low risk premiums in the corporate bond market.

(Reporting by Richard Leong; Editing by Frances Kerry and Chizu Nomiyama)

 

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