A resilient US economy will prompt the Federal Reserve to pencil in one more interest-rate hike this year and stay at the peak level next year for longer than previously expected, according to economists surveyed by Bloomberg News.
The Federal Open Market Committee will keep rates steady in the 5.25% to 5.5% range at its Sept. 19-20 meeting, the survey showed, and remain there until a first cut next May – two months later than the economists’ view in July.
A robust economy is shaping the September meeting discussion. The median committee member is likely to see economic growth this year at 2%, double the 1% forecast in June and compared with 0.4% seen in March. In addition, they are likely to forecast a hotter labor market, with the unemployment rate, now 3.8%, edging 0.1 point higher to 3.9%, or lower than the 4.1% rate seen in June and 4.5% in March.
In its forecasts, the committee is likely to continue to see the inflation rate as being elevated, with a year-end projection of 3.2%. The outlook for underlying core inflation, excluding food and energy, is slightly improved at 3.8%. The economists expect the policymakers to forecast reaching their 2% inflation goal in 2026.“Bloomberg Economics expects the FOMC to hold rates at 5.5% at the Sept.
“Core inflation remains overly high and the economy is doing better than many analysts anticipated,” said Dennis Shen, senior director of Scope Ratings. “The risk for the Federal Reserve is of doing too little, rather than of doing too much.”
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