Fed set for another 75-basis-point rate hike; early pivot unlikely

The Federal Reserve will deliver another 75-basis-point interest rate hike next week and likely hold its policy rate steady for an extended period once it eventually peaks, according to a Reuters poll of economists released on Tuesday.

Policymakers have done little to push back on market pricing for a third consecutive rate hike of three-quarters of a percentage point at the U.S. central bank’s Sept. 20-21 meeting, with inflation, as measured by the Fed’s preferred gauge, running at more than three times its 2% target.

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.

The shift in expectations for the larger hike has pushed the dollar to a two-decade high against a basket of currencies. TheU.S. currency was forecast to extend its dominance for the remainder of this year and into early next.

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