The Federal Reserve will raise its key interest rate to a much higher peak than forecast two weeks ago and the risks are tilted towards an even higher terminal rate.according to economists polled by Reuters.
key takeaways
In fact, over 70% of economists59 of 83, predicted the central bank would raise its fed funds rate by three-quarters of a percentage point for the fourth time in a row in Novembera Reuters poll taken after last week’s Fed meeting showed.
The survey predicted that this would be followed by 50 basis points in December to end the year at 4.25%-4.50%.
If true, it would be the highest rate since early 2008., before the worst of the global financial crisis, and 75 basis points higher than the 3.50%-3.75% forecast just two weeks ago. The forecasts are in line with the Fed’s projections and with current market prices.
The majority, 45 of 83 economists, predicted the fed funds rate would peak at 4.50%-4.75% or higher in the first quarter of 2023equal to the dot plot projection and higher than the estimated neutral level of 2.4% that neither stimulates nor restrains economic activity.
All but two of the 51 economists who responded to an additional question said the risks were tilted toward a higher terminal rate than they currently expected.
Among the economists who had a vision until the end of 2023, only 46% expected at least one rate cut.
More than 80% of those surveyed said that once the fed funds rate peaks, the central bank is more likely to leave it unchanged for an extended period rather than cut it quickly.
Source: Fx Street
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