|

Fed to take rates higher than previously expected; more pain ahead – Reuters poll

The Federal Reserve will hike its key interest rate to a much higher peak than predicted two weeks ago and the risks are skewed towards an even higher terminal rate, according to economists polled by Reuters.

Key findings

Indeed, over 70% of economists, 59 of 83, predicted the central bank would hike its fed funds rate by three-quarters of a percentage point for the fourth straight meeting in November, a Reuters poll taken after the Fed meeting last week showed.

The survey predicted that would be followed by 50 basis points in December to end the year at 4.25%-4.50%.

If realized, that would be the highest rate since early 2008, before the worst of the global financial crisis, and 75 basis points higher than 3.50%-3.75% predicted just two weeks ago. The forecasts are in line with the Fed's dot-plot projection and current market pricing.

A majority, 45 of 83 economists, predicted the fed funds rate peaking at 4.50%-4.75% or higher in Q1 2023, the same as the dot plot projection and higher than the estimated neutral level of 2.4% that neither stimulates nor restricts economic activity.

All but two of 51 economists who replied to an additional question said the risks were skewed towards a higher terminal rate than they currently expected.

Among economists who had a view through end-2023, only 46% forecast at least one rate cut.

More than 80% of respondents said once the fed funds rate reaches a peak, the central bank was more likely to leave it unchanged for an extended period rather than cut it quickly.

Also read: EUR/USD renews 22-year low as yields propel DXY, focus on ECB vs. Fed drama, energy crisis

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Editor's Picks

EUR/USD flat lines near 1.1800 as traders brace for US PPI release

The EUR/USD pair trades on a flat note near 1.1800 during the early Asian session on Friday. The pair steadies as softer Eurozone inflation offsets US tariff uncertainties. Traders await the preliminary reading of the Consumer Price Index from Germany on Friday for more clues about the pace of future policy easing. On the US front, the Producer Price Index report will be released. 

GBP/USD declines below 1.3500 on UK political uncertainty, US PPI data eyed

The GBP/USD pair loses ground to near 1.3485 during the early Asian session on Friday. The Pound Sterling weakens against the Greenback amid rising UK political uncertainty surrounding the Gorton and Denton by-election.  

Gold awaits acceptance above $5,200 and US PPI data

Gold consolidates previous rebound near $5,200 amid risk-off markets, awaiting US PPI release. The US Dollar eyes a flattish weekly close as dovish Fed outlook and tariff woes outweigh geopolitical risks. Gold yearns for acceptance above $5,200 to resume the uptrend, with a bullish RSI in play.

Top Crypto Gainers: Stable and Decred rally, Pippin approaches record highs

Altcoins, such as Stable, Decred, and Pippin, are extending gains so far this week, defying the risk-averse conditions in the broader cryptocurrency market. Stable and Pippin are near record high levels, while Decred extends its breakout rally above $30.

Changing the game: International implications of recent tariff developments

The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.