Reuters Poll: Economists Now See Fed Rate Hike This Week, More Tightening Ahead
By CU Today Staff —
WASHINGTON—The Federal Reserve is now expected to raise interest rates this week and deliver at least one additional hike by the end of March, a sharp reversal from just days ago as hotter inflation readings reshape the outlook for monetary policy, according to a new Reuters poll.
Reuters said 86 of 101 economists surveyed after Friday’s inflation report expect the Fed to raise its benchmark rate by a quarter percentage point to 3.75%-4.00% at its Sept. 15-16 meeting, which would mark the first increase since July 2023.
The shift has been swift. Reuters reported that more than two-thirds of economists surveyed last week had expected the Fed to hold rates steady. Now, nearly 53% of forecasters—37 of 70—expect at least one additional increase by the end of March, while interest-rate futures are pricing in close to a 90% chance of a hike this week. Reuters separately reported that Goldman Sachs, J.P. Morgan, HSBC and Deutsche Bank are among major firms now forecasting a quarter-point increase.
The change followed stronger-than-expected inflation readings and comes as oil prices above $100 a barrel add to concerns that price pressures will remain elevated. Reuters reported economists have also focused on producer-price components that feed into the Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, with many now expecting core PCE inflation to have accelerated in August. Meanwhile, the 10-year Treasury yield has approached 5%, increasing pressure on the Fed to demonstrate its commitment to returning inflation to its 2% target.
The question is increasingly shifting from whether the Fed will hike Wednesday to how much additional tightening could follow.
“A quarter point may be the opening move, not the final one,” KPMG chief economist Diane Swonk told Reuters. “The only durable path to lower borrowing costs is to contain inflation.”
Reuters reported that the majority view among economists no longer calls for lower rates in 2027, while futures markets are pricing roughly four increases by the end of July 2027.
Originally reported by CU Today.