The US central bank has raised its benchmark policy rate above 4% and will keep it there beyond 2023 to eradicate high inflation. leading academic economist Financial Times poll.
up to date InvestigationImplemented in conjunction with the University of Chicago Booth School of Business Initiative on Global Markets .
The Federal Funds Rate, which recently hovered near zero until March, is now hovering between 2.25% and 2.50%. The Federal Open Market Committee will meet again for his two-day policy meeting on Tuesday. Be expected Three consecutive 0.75% rate hikes. The move will raise interest rates to a new target range of 3-3.25%.
Nearly 70% of the 44 economists surveyed between Sept. 13-15 believe the Fed Funds rate will peak between 4% and 5% in this tightening cycle, with 20% I think we need to go beyond the level.
Eric Swanson, a professor at the University of California, Irvine, who expects the federal funds rate to eventually plateau between 5% and 6%, said, “The FOMC is not yet sure how far rates need to be raised. We haven’t struck a deal,” he said. “If the Fed wants to slow the economy now, they need to raise the funding rate further. [core] inflation. “
The Federal Reserve typically targets 2% of the “core” personal consumption expenditure (PCE) price index (excluding volatile items such as food and energy), but it also closely monitors the consumer price index. I’m here.unexpected inflation acceleration The core reading for August was up 0.6% for the month, up 6.3% from the previous year.
Most respondents expect core PCE to fall from the most recent July level of 4.6% to 3.5% by the end of 2023. Another 27% said they were “almost unlikely” to remain above that threshold at that point. This points to great fears that high inflation will permeate the economy even deeper.
John Steinson of the University of California, Berkeley said, “I fear that we have reached a point where we are at risk of severely undermining the Fed’s credibility, so the Fed needs to start acknowledging it fully. there is,” he said.
“We all had hoped inflation would start to fall, but we have been disappointed time and time again. , the Fed has warned it will be unable to adequately control inflation.
Most respondents believe the Fed will not only raise interest rates to levels that constrain economic activity, but will keep them there for some time.
Easing price pressures, destabilizing financial markets, and deteriorating labor markets are the most likely reasons for the Fed to pause its tightening campaign, although 68% of those surveyed said the Fed could be delayed as early as 2024. A cut in fund interest rates is not expected. A quarter of them do not expect the Fed to cut its benchmark policy rate until late 2024 or beyond.
But few believe the Fed will step up efforts to: contraction Approximately $9 trillion balance sheet from outright sales of agency mortgage-backed securities holdings.
Nearly 70% of respondents have high hopes for the National Bureau of Economic Research. official arbitrator When will the US recession start and end — to declare a recession in 2023? target.
Most economists expect the US recession to last two or three quarters, with more than 20% expecting it to last four quarters or more. According to 57% of respondents, the peak unemployment rate he could be between 5% and 6% is well above that level. Current 3.7% range. A third think it’s above 6%.
Julie Smith of Lafayette University warned, “If at some point these rate increases cause unemployment to rise, this will befall workers who can afford it most.” Even if there is, it’s a 1-2 percent increase in unemployment, and it’s really painful for real households that aren’t prepared to weather this kind of shock.”
The easing of supply-related constraints linked to the war in Ukraine and the Covid-19 lockdown in China could help minimize the amount the Fed would have to squelch demand, ultimately leading to serious The economic contraction will ease.University of Maryland. However, she warned that the outlook was highly uncertain.
“It’s clear that there will be a series of shocks and I’m not convinced this will happen anytime soon,” said Karemli Ozkan. “I can’t give you a timeframe, but we are moving in the right direction.”