Fed would hold rates in October and hike in December, Reuters survey finds
The U.S. Federal Reserve would leave its benchmark interest rate unchanged in the 3.75% to 4.00% range at its October 27-28 meeting, and raise it by a quarter point in December, according to a Reuters survey of 100 economists conducted October 16-20.
According to the results, published Tuesday by Reuters, 94 of the 100 respondents expect the central bank to hold rates steady next week —in line with market pricing— while all 100 foresee an increase in December. It is a sharp reversal from the September survey, when fewer than half expected a December hike. The Federal Open Market Committee raised rates 25 basis points in September with a unanimous vote.
Nearly 60% of forecasters estimate the rate will peak in the 4.00% to 4.25% range, and 38 of 92 expect at least two more increases, up from one-fifth in the previous survey. “You have a strong economy and you have inflation. There's really no reason for you to worry so much about getting interest rates higher,” Alex Pelle, senior U.S. economist at Mizuho Securities, told Reuters, adding that the bigger risk is that the Fed ends up hiking 50 basis points in December rather than doing nothing.
The survey medians show the personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, staying more than a full percentage point above the 2% target in coming quarters and not returning to target until at least 2028. Reuters reported that inflation has run above target for nearly six years, with oil above $100 a barrel driven by higher energy costs.
The October meeting falls days before the November midterm elections. The report also notes that Fed Chair Kevin Warsh has made clear he is not keen on giving explicit guidance on the path of rates.
Photo: Wealth Professional