Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Fed to wait until 2023 to raise rates, but there is risk of earlier hike: Reuters poll

EconomyOct 19, 2021 08:13PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The Federal Reserve building is set against a blue sky in Washington, U.S., May 1, 2020. REUTERS/Kevin Lamarque/File Photo

By Shrutee Sarkar

BENGALURU (Reuters) - The Federal Reserve will wait until 2023 before raising interest rates, according to a majority of economists in a Reuters poll who nonetheless said the greater risk for the U.S. economy was persistently higher inflation over the coming year.

While half the members of the U.S. central bank's policy-setting committee projected last month that the Fed would raise its benchmark overnight lending rate - federal funds rate - next year, most economists surveyed were more cautious.

The poll was conducted Oct. 12-18.

"We continue to expect the Fed to remain patient. We continue to forecast no liftoff for the funds rate until late 2023, but exact timing will depend critically on how the outlook evolves as more data are reported," said Jim O'Sullivan, chief U.S. macro strategist at TD Securities.

Forty of 67 economists said the fed funds rate would rise from its current level of 0-0.25% in 2023 or later, with most clustering around the first quarter of that year. The remaining 27 economists expect a rate hike by the end of next year.

Reuters Poll: U.S. economy outlook https://fingfx.thomsonreuters.com/gfx/polling/jnpwewleapw/Reuters%20Poll-%20U.S.%20economy%20and%20Fed's%20outlook%20-%20October%202021.png

Pent-up consumer demand in a reopening economy is raising price pressures at a time when global supply chains, disrupted by the coronavirus pandemic, are causing widespread inventory shortages.

High inflation is a concern for many central banks, some of which have already raised rates or are close to doing so. The Fed, for its part, is expected to announce next month that it will begin reducing the $120 billion in monthly bond purchases it has been making to stem the economic fallout of the pandemic.

Twenty-nine of the 37 economists who responded said the risk for the timing of the Fed's first interest rate hike was that it could come earlier than they expected.

"Unfortunately, we doubt supply-chain issues and labor market shortages will be resolved quickly, so inflation will remain elevated through 2022. Given this situation, we expect interest rate rises in September and December next year," said James Knightley, chief international economist at ING.

Twenty-two of the 40 economists who responded to an additional question said the greater worry for the U.S. economy over the coming year was persistently higher inflation, and 30% of them said it was a bigger-than-expected slowdown in growth.

The consensus for the personal consumption expenditures (PCE) price index excluding food and energy, one of the Fed's key inflation gauges, pointed to above-target inflation through to the end of next year, albeit slowing in the second half of 2022, along with economic growth.

"We are raising core inflation estimates a little, reflecting ongoing supply/demand imbalances," TD Securities' O'Sullivan said.

"Yes, the inflation projections for 2021 keep getting raised, but Fed policy needs to be positioned appropriately for where the economy is heading, not where it has been."

After expanding 6.7% in the second quarter on an annualized basis, U.S. economic growth was expected to have slowed to 3.8% in the third quarter before expanding 5.0% in the current quarter. That compared with the 4.4% and 5.1% predicted in September for the third and fourth quarters, respectively.

On average, the economy was expected to grow 4.0% next year, 2.5% in 2023 and 2.2% in 2024. That compared with previous forecasts of 4.2% for 2022 and 2.3% for 2023. The September poll did not ask for forecasts for 2024.

The dilemma for Fed policymakers, who are tasked with targeting stable inflation as well as maximum employment, is whether early rate hikes to stop inflation from spiraling higher might potentially sacrifice further job gains.

The unemployment rate was expected to hover between 3.6% and 4.7% until the second half of 2023 at least, with only a handful of economists predicting it to dip to where it was before the pandemic.

(For other stories from the Reuters global economic poll:)

Fed to wait until 2023 to raise rates, but there is risk of earlier hike: Reuters poll
 

Related Articles

Pakistan receives $3 billion loan from Saudi Arabia
Pakistan receives $3 billion loan from Saudi Arabia By Reuters - Dec 04, 2021

By Syed Raza Hassan KARACHI, Pakistan (Reuters) - Pakistan on Saturday received a $3 billion loan from Saudi Arabia, the prime minister's finance adviser said, as part of an...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email