The Federal Reserve will deliver another 75-basis-point (bp) interest rate hike next week and likely hold its policy rate steady for an extended period once it eventually peaks, according to the latest Reuters poll of economists released on Tuesday.
A strong majority of economists, 44 of 72, predicted the central bank would hike its fed funds rate by 75 basis points next week after two such moves in June and July, compared to only 20% who said so just a month ago.
If realized, that would take the policy rate to the 3.00%-3.25% target range, the highest since early 2008, before the worst of the global financial crisis. The remaining 39% still expected a 50-basis-point hike.
Economists said the interest rate outlook for the September meeting could change if inflation drops. The U.S. Labor Department is due to release consumer price index data on Tuesday, with economists polled by Reuters forecasting the CPI would rise 8.1% in the 12 months through August. The CPI jumped 8.5% in the 12 months through July.
There was still no consensus among economists on where and when the Fed will stop hiking rates, and similarly there was no consensus on when it would start cutting them.
Once the fed funds rate reaches a peak, the central bank is more likely to leave it unchanged for an extended period rather than cut it quickly, according to more than 80% of respondents who answered an additional question.
The unemployment rate needs to go significantly higher to bring inflation down to 2%, according to 16 of 30 respondents to an additional question who gave a median jobless rate of 5%. The other 14 said it did not need to rise significantly.
Also read: US CPI Preview: Dollar set to climb on low core expectations, three scenarios
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