Bank of Montreal economists are predicting interest rate hikes of 25 basis points at each of the U.S. Federal Reserve Board’s next two meetings.

“Sustained strength of the economy and still accomodative monetary conditions will likely keep the Fed raising rates in a measured but deliberate manner in the near-term,” they say in the bank’s latest checklist of what the Fed watches. “The federal funds rate is expected to increase by 25 basis points at each of the next two policy meetings.”

“The Fed is then expected to hold rates steady at 2.75% for a while to assess the impact of the tightening on the economy,” they add.

“It will renew the tightening cycle in November 2005, gradually lifting rates to a “neutral” level of 4.5% before the end of 2006,” they conclude.