Economists Expect Fed To Hike Rates Aggressively In Coming Months: Reuters

According to economists polled by Reuters, the Federal Reserve is anticipated to raise interest rates by a half-point in May and June to tackle rising inflation. They also predict a 40% chance of a recession next year.

With the unemployment rate nearing a four-decade low, inflation at its highest level in four decades, and global commodity prices rising, most analysts believe the Fed needs to act fast to keep price pressures under control.

More than 100 economists polled by Reuters between April 4 and 8 predicted two half-point rate hikes this year, the first since 1994, bringing the federal funds rate to 1.25 percent -1.50 percent by the June meeting.

85 of 102 economists forecast 50 basis points in May, and a still-solid majority of 56 said the Fed would follow up with 50 basis points in June.

"Given the shift in official commentary and with inflation pressures visible throughout the economy, we believe the Fed will deliver half-point interest rate increases at the May, June and July policy meetings," stated James Knightley, chief international economist at ING.

While the central bank, chaired by Jerome Powell, is likely to gear down to quarter-point moves in the second half of this year, the federal funds rate is now expected to end 2022 at 2.00%-2.25%, 50 basis points higher than the median forecast in a poll taken last month.

"With the Fed seemingly feeling the need to 'catch up' to regain control of inflation and inflation expectations, a rapid-fire pace of aggressive interest-rate increases heightens the chances of a policy misstep that could be enough to topple the economy into a recession," added Knightley.

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