Nearly all economists in a Reuters poll expect the Federal Reserve to hold rates in October and raise them in December. All 100 respondents see a December hike, and more forecasters now expect further increases beyond that.
94 of 100 economists in the October 16-20 Reuters poll expect the Fed to hold the federal funds rate in a 3.75%-4.00% range at its October 27-28 meeting. That matches market pricing, and the meeting falls just days before the November midterm elections.
December hike now unanimous
However, all 100 respondents expect a rate hike in December, a sharp reversal from less than half in last month's poll. The Federal Open Market Committee unanimously raised rates by 25 basis points in September.
Fed officials have recently suggested they prefer a slower, more deliberate path for rates, even as reports show a strong economy and hotter-than-expected inflation. Fed Chair Kevin Warsh, who has made clear he is not keen on giving guidance, has kept mum.
According to Reuters, Alex Pelle, senior US economist at Mizuho Securities, said: "Them not going in October is the wrong call from a policy point of view". He expects 25 basis points in December but sees a greater risk of 50 than of no move.
More forecasters see a higher peak
Nearly 60% of forecasters see the policy rate peaking at a 4.00%-4.25% range. The other 38 of 92 predict at least two further rate increases, up from just one-fifth in the September survey.
Inflation has been above the Fed's 2% target for nearly six years. Poll medians show the PCE Price Index, the Fed's preferred gauge, staying more than 100 basis points above 2% over coming quarters and not returning to target until at least 2028. Reuters links the rising cost of living to higher energy costs from President Donald Trump's war with Iran and to new tariffs on imported goods.
Growth stays above the Fed's non-inflationary pace
The economy grew at an annualized 2.2% pace in the second quarter, boosted in large part by AI-driven investment. Economists forecast growth of 2.3% this year and 2.1% in 2027, above the 2.0% pace the Fed considers non-inflationary.
Source: Investing.com (Reuters)
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