After the recent increase in the federal funds rate, the US Federal Reserve is set to raise the lending rate by 25 basis points to 5.25% in three days, according to forecasts. A recent poll of 105 economists revealed that 94 of them expect a 25 basis point rate hike at the FOMC meeting on May 2-3. While economists expect a rate hike in May, they expect the last increase to be in 2023. The majority of economists surveyed believe the Fed will keep the rate at 5.25% for the remainder of the year.
The report says the next phase of the tightening cycle is to keep the benchmark at current levels
Numerous reports and polls indicate that market watchers believe the US central bank will raise its benchmark interest rate by 25 basis points at the FOMC meeting this week. The FOMC meeting is scheduled for May 2-3 and according to the CME Group Fedwatch tool, 83.9% I suspect a 25 basis point rate hike will pay off. On the other hand, the Fedwatch tool shows that 16.1% do not expect a rate hike at the next May meeting.
The latest projections ahead of the next FOMC meeting are similar to projections made by economists at the beginning of April 2023. Additionally, Bloomberg mentioned On April 29th, the economists who spoke to the bulletin also think there is a 25 basis point increase.
The Bloomberg Economic Report states:
Evidence is that the FOMC will raise interest rates by 25 basis points to 5.25% in the May 3 decision – despite the ongoing turmoil in the banking system – and suggest that this will be the last hike for a while. The next phase of the tightening cycle will be to hold rates at this high level, while you watch to see if inflation trends come down.
Poll shows 90% of economists expect a 25 basis point rise in May, BOFA analyst says further increases beyond could be uncertain
according to reconnaissance From Reuters, the vast majority (90%) of 105 economists polled suspect a 25 basis point rally. In addition, 59 of these economists believe the federal funds rate will remain unchanged for the rest of the year after the expected hike in May, while 26 respondents expect a rate cut. Moreover, most economists polled by Reuters do not expect the US inflation rate to reach the Fed’s 2% target until 2025. Economists also noted that there is still a risk of inflation rising again this year.
Michael Jabin, chief US economist at Bank of America (BOFA) Securities, commented that there was still a lot to be done before the 2% target could be reached. Jabin also added that it is uncertain whether or not the Fed will raise the benchmark interest rate after May.
“On the data front, despite the slowdown in inflation in March, there is still a lot of work to be done to get back to the 2% target,” Jabin said. The BOFA executive added: “We are maintaining the first rate cut in March 2024. If pressures in the financial system are reduced in a short time, we cannot rule out that strong macro data will prompt the Fed to raise additional increases after May.”
What do you think of the impact of the expected rate hike by the US Federal Reserve on the economy? Share your thoughts in the comments section below.
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