“The US Federal Reserve will lift interest rates higher by the end of this year than anticipated just a month ago, keeping alive already-significant risks of a recession,” said the latest Reuters poll of economists, published during Friday’s Asian session.
The May 12-18 Reuters poll showed a near-unanimous set of forecasts for a 50-basis-point hike in the fed funds rate, currently set at 0.75%-1.00%, at the June policy meeting following a similar move earlier this month. One forecaster anticipated a hike of 75 basis points.
A majority of poll respondents now expect the fed funds rate to be at 2.50%-2.75% or higher by the end of 2022, six months earlier than predicted in the previous poll, and roughly in line with market expectations for a year-end rate of 2.75%-3.00%.
That would bring it above the "neutral" level that neither stimulates nor restricts activity, estimated at around 2.4%.
Nearly 75% of respondents to an additional question in the poll - 29 of 40 - said the Fed's rate hike path was more likely to be faster over the coming months than slower.
Meanwhile the poll showed a median 40% probability of a U.S. recession over the next two years, with a one-in-four chance of that happening in the coming year. Those probabilities were steady compared with the last survey.
Forecasts for the unemployment rate remained optimistic, averaging 3.5% this year and next, before picking up to 3.7% in 2024. But more than 80% of respondents to an additional question - 28 of 34 - said that over the coming two years it was more likely that unemployment would be higher than they currently expected than lower.
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