After the most recent increase in the federal funds rate, the U.S. Federal Reserve is set to raise the lending rate by 25 basis points (bps) to 5.25% in three days, according to expectations. A recent poll of 105 economists revealed that 94 of them predict a 25bps rate hike will occur during the May 2-3 Federal Open Market Committee (FOMC) meeting. While economists are anticipating a rate hike in May, they anticipate that it will be the final one in 2023. The majority of polled economists believe that the Fed will maintain the rate at 5.25% for the remainder of the year.
Report Says Next Phase of the Tightening Cycle Is Holding Benchmark Rate at Current Levels
Several reports and surveys indicate that market observers believe the U.S. central bank will increase the benchmark interest rate by 25bps at the FOMC meeting this week. The FOMC meeting is scheduled to take place on May 2-3 and according to the CME Group Fedwatch tool, 83.9% suspect a 25bps rate hike will come to fruition. On the other hand, the Fedwatch tool shows 16.1% predicts no rate hike for the upcoming May meeting.
The most recent predictions ahead of the next FOMC meeting are similar to the forecasts economists gave at the beginning of April 2023. Additionally, Bloomberg reported on April 29, that economists the publication talked to also believe a 25bps rise is in the cards.
Bloomberg’s economics report states:
Signs point to the FOMC raising rates by 25 basis points to 5.25% in the May 3 decision — despite ongoing turmoil in the banking system — and signaling that this will be the last hike for a while. The next phase of the tightening cycle will be to hold rates at that elevated level, while watching to see if inflation trends down.
Survey Shows 90% of Economists Suspect a 25bps Rise in May, BOFA Analyst Says Additional Hikes Beyond May Uncertain
According to a survey from Reuters, a vast majority (90%) of 105 economists polled suspect a 25bps hike. Additionally, 59 of those economists believe that the federal funds rate will remain unchanged for the rest of the year following the predicted May hike, while 26 participants are forecasting a rate cut. Furthermore, most of the economists surveyed by Reuters do not anticipate the inflation rate in the U.S. to reach the Fed’s 2% target until 2025. The economists also noted that there’s still a risk of inflation rates spiking again this year.
Michael Gapen, the chief…
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