Majority of Top U.S. Economists Forecast One More Interest Rate Hike This Year

Top U.S. economists have recently predicted that the Federal Reserve will raise interest rates at least one more time this year. Bankrate’s first-quarter economic data survey shows that 53% of U.S. economists expect the federal funds rate to peak in its target range of 5.00 to 5.25%. Meanwhile, 18% of respondents predicted two or more rate hikes, 22% predicted three or more, and only 6% expected four or more.

Furthermore, 88% of economists in the survey expected a slowdown in inflation over the next 12 to 18 months, while 64% predicted a recession this year. The Commerce Department’s Personal Consumption Expenditure (PCE) index, which is the Fed’s preferred inflation indicator, is projected to fall to 3.3% by the end of the year, while the U.S. 10-year Treasury yield is expected to average 3.71%.

Regarding employment, experts predict that the average unemployment rate next year will rise to 4.6%, and the average number of jobs will decrease by 20,700 each month over the next year.

Despite the predictions for a potential recession and slowdown in inflation, 82% of respondents expected no rate cut until 2024. The percentage of respondents who expected an interest rate cut within the year also dropped significantly from 38% in the previous quarter to 18%.

Experts believe that inflation is unlikely to reach the Fed’s 2% target in 2023. Odeta Kushi, chief economist at First American Financial, stated that “we won’t cut interest rates until now.” Meanwhile, Nayantara Hensel, chief economist at Seaborne Defense, believes that the Fed needs to assess the impact of a delay in raising rates and will not cut rates until after 2024.

Although the majority of experts expect no rate cut until 2024, the Chicago Mercantile Exchange (CME) FedWatch futures market predicts that the Fed will freeze the benchmark interest rate and then turn to a rate cut from September. The market sees a 36% chance that the benchmark rate will be in the range of 4.00-4.25% at the monetary policy meeting in December this year.

In conclusion, the predictions of top U.S. economists show that the Federal Reserve is likely to raise interest rates at least one more time this year. However, there is some uncertainty regarding whether a rate cut will occur in the near future. As always, these predictions are subject to change based on economic developments and unforeseen events.

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