Economists believe that the United States Federal Reserve will proceed with a fourth consecutive 75 basis point interest rate hike on November 2, according to a poll by Reuters. They agree that the Fed should not slow hikes until inflation falls to half of today’s 8.2%.
86 of the 90 economists surveyed from October 17 to 24 predicted that the federal funds rate would go up 75 basis points to 3.75%-4% at the next Fed meeting as inflation is persistently high and unemployment numbers are near pre-pandemic lows.
Officials are hiking rates faster and more aggressively than they have in the last four decades. The 75 basis-point hike in June was the first since 1994. With this, the survey showed a heightened likelihood of a recession in the next year from 45% to 65%.
“Instead of a pivot, in our view, the Fed is signaling that they foresee shifting from front-loading up to December, towards more of a more grinding pace of hikes from then onward,” said Jan Groen, chief U.S. macro strategist at TD Securities.
The next Fed meeting will prove crucial in planning the trajectory of the next few months, as this, and not just the current meeting’s hike, will influence broader financial conditions. “We will have a very thoughtful discussion about the pace of tightening at our next meeting,” Fed governor Christopher Waller said in a speech earlier this month.
The decision will be up to Jerome Powell, who at the end of August said that the Fed will not let off on its hawkish monetary policy regardless of the economic pain caused by rising interest rates.
The CME Group says that interest-rate futures markets investors are now seeing a hike of up to 5% by spring, a significant rise from most officials projecting 4.6%.
In the Reuters survey, economists’ responses suggest that the turning point for the Fed should be at half of the current inflation rate. They do not expect this to happen until the second quarter of 2023, with projected averages showing 8.1% in 2022, 3.9% in 2023, and 2.5% in 2024.
Information for this briefing was found via Reuters, the Wall Street Journal, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.