Fed to slow to 50 bps hike in September as recession fears grow – Reuters poll

According to economists surveyed in the latest Reuters poll, the US Federal Reserve (Fed) is seen raising rates by 50 basis points (bps) in September.

Key findings

“Most economists in an Aug. 16-19 Reuters poll predicted a half percentage point hike next month, the same as in the last poll, which would take the key interest rate to 2.75%-3.00%.”

“Eighteen of the 94 surveyed expected the Fed to go for 75 basis points.”

“A cumulative 225 basis points of hikes since March and with more to come have brought a recession closer and the survey showed a 45% median probability of one over the coming year, up from July's 40%, and a 50% chance of one within two years.”

“Nearly 90% of participants saw the key policy rate at 3.25%-3.50% or higher by the end of this year.”

“Thirty-seven of 48 economists said if the U.S. enters a recession within the next two years, it would be short and shallow. Ten said it would be long and shallow and only one said long and deep.”

“Consumer price inflation was expected to remain above the Fed's 2% target until at least 2024 - averaging 8.0% and 3.7% this year and next.”