Hike rates

Expert Poll: Fed to Raise Rates as Recession Worries Rise

Federal Reserve expected to raise interest rates by fifty basis points in September amid growth recession concernsaccording to economists in a new Reuters poll.

“Most economists … predicted a half-percentage-point hike next month, similar to the last poll, which would take the key interest rate to 2.75%-3.00%,” he said. said the news agency. wrote. “Eighteen of 94 respondents expected the Fed to hit 75 basis points.”

At the end of last month, the Federal Reserve raised its short-term policy rate by three-quarters of a percentage point for a second consecutive month. The unanimously approved rate hike put the federal funds rate in a range of 2.25% to 2.5%, the highest level seen since December 2018.

In his post-meeting statementthe Federal Open Market Committee responsible for setting rates noted that “inflation remains elevated, reflecting pandemic-related supply and demand imbalances, rising food and energy prices, and pressures broader on prices”.

“Persistent inflation continues to pose the greatest threat to the economy. Inflation may not fall as expected. In this case, policy rates should be much more restrictive, somewhere in the 4-5% range Sal Guatieri, senior economist at BMO Capital Markets, told Reuters.

“If that’s the case, there won’t be much debate about whether the economy can avoid a deep downturn,” he continued.

Late last week, San Francisco Federal Reserve Chair Mary Daly said raising interest rates by half or three-quarters of a percentage point in September would be a way reasonable” to further control inflationary pressures. Plus, she doesn’t see the Fed easing rate hikes anytime soon.

“We have a lot of work to do at the Fed to get us back to price stability,” Daly said, per CNN Business.

“There is a lack of understanding in the markets, but consumers seem to understand. They depend on the Fed not to introduce unnecessary volatility. The worst thing you can have as a business or consumer is that rates go up quickly and then come down. … It just causes a lot of caution and uncertainty,” she added.

During this time, by fox businessJPMorgan strategists expect the Fed to make another substantial interest rate hike next month, but that could be the last of those moves as growth begins to slow.

“We expect another outsized Fed hike in September, but after that we would look for the Fed not to surprise markets on the hawkish side again,” the bank said in an analyst note on Monday.

Ethen Kim Lieser is a Washington State-based finance and technology editor who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow him or contact him on LinkedIn.

Picture: Reuters.