WASHINGTON–A survey of economists by Reuters has found most agree the Federal Reserve will go for its fourth consecutive 75 basis point interest rate hike when it meets on Nov. 2, with the economists saying the central bank should not pause until inflation falls to around half its current level.
According to the Reuters survey, the economists indicated a median 65% probability of a recession within a year, up from 45%.
“Still, a strong majority of economists, 86 of 90, predicted policymakers would hike the federal funds rate by three quarters of a percentage point to 3.75%-4.00% next week as inflation remains high and unemployment is near pre-pandemic lows,” Reuters reported.
Reuters added the results in the poll are in line with interest rate futures pricing. Only four respondents predicted a 50 basis point move.
‘Grinding Pace’
“The front-loading of policy rate tightening we have seen up to now has been aimed at getting to a positive real Fed funds rate at the start of 2023,” Jan Groen, chief U.S. macro strategist at TD Securities--referring to rates adjusted for inflation—told Reuters. “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.”
A majority of economists in the Oct. 17-24 poll forecast another 50 basis point hike in December, Reuters added.
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