Economists Polled By Reuters Say At Least 2 More Fed Rate Hikes Up This Year

The US Federal Reserve will raise interest rates at least twice more in coming months, with the risk they go higher still, according to a majority of economists in a Reuters poll who see no cut by yearend, Indradip Ghosh reported.

Photo Insert: With inflation still at more than twice the Fed's 2.0% target, 46 of 86 economists in the Feb. 8-13 Reuters poll predicted the US central bank will go for two more 25 basis point hikes, in March and May, not just March.

This brings the majority of private-sector forecasters in line with the central bank's own projections and rhetoric, leaving financial market traders alone in clinging on to hopes rates will start falling later this year.

Thanks to much stronger-than-expected US jobs data earlier this month, Fed policymakers, including Fed chair Jerome Powell, have reiterated a higher-for-longer mantra that market traders have been fighting for months.

With inflation still at more than twice the Fed's 2.0% target, 46 of 86 economists in the Feb. 8-13 Reuters poll predicted the US central bank will go for two more 25 basis point hikes, in March and May, not just March.

That would mean a peak of 5.00%-5.25%, 25 basis points higher than what the majority had been predicting since November. All 37 who replied to an extra question said the bigger risk was the fed funds rate would peak even higher.

"We currently expect two more hikes...But the risk is towards higher rates. The labor market remains strong and it's going to take a bit more time for it to start showing signs of deterioration," said Oscar Munoz, US macro strategist at TD Securities, who changed his forecast last month.

"That puts the risk of keeping services inflation and wage growth elevated for quite a bit and that's going to filter back into inflation. That means the Fed is going to keep the policy rate at high levels for quite a bit longer."

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