Fed to lift rates by 75 basis points in July, 50 bps in September – Reuters poll

The latest poll results, released on Wednesday before Fed Chair Jerome Powell was due to appear before the Senate Banking Committee as part of his twice-yearly monetary policy testimony to Congress, show momentum is still behind the U.S. central bank doing more, not less, despite rising recession concerns and a steep sell-off in financial markets.

In the June 17-21 Reuters poll, nearly three-quarters of economists, 67 of 91, expected another 75-basis-point U.S. rate hike in July. That would take the fed funds rate to a range of 2.25%-2.50%, roughly the neutral level where the Fed estimates the economy is neither stimulated nor restricted.

A strong majority expect the central bank to hike its policy rate by another 50 basis points in September, with opinion more split on whether it will hike by 25 or 50 basis points in November. A majority expect the Fed to raise rates by 25 basis points at its December meeting.

That would take the fed funds rate to a range of 3.25%-3.50% by the end of this year, 75 basis points higher than thought in a poll published just two weeks ago.

Around three-quarters of respondents, 68 of 91, saw the end-year rate at 3.25%-3.50% or higher, in line with the Fed's own "dot plot" showing policymakers' projections.

The poll predicted only one 25-basis-point hike in the first quarter of next year, pushing the federal funds rate to 3.50%-3.75%, the possible terminal rate.

The Fed was expected to pause in the second and third quarters of 2023 and cut rates by 25 basis points in the final quarter of next year, according to the median forecast from a smaller sample. But forecasts for where the fed funds rate will be by the end of 2023 ranged between 2.50%-2.75% and 4.25%-4.50%, underscoring high uncertainty.