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The Fed may raise interest rates to 2.5 – 2.75% by the end of the year

According to the survey of Reuters conducted with 89 economists on May 12-18, economists almost unanimously forecast that the US Federal Reserve (FED) will increase interest rate 50 basis points from 0.75 – 1% now at the June meeting, following a similar move earlier this month. One economist sees an increase of 75 basis points.

The Fed may raise interest rates to 2.5 - 2.75% by the end of the year - Photo 1.

Fed Chairman Jerome Powell said that the Fed will raise interest rates to necessary high levels. (Photo: Bloomberg)

54/89 economists believe that the Fed will raise interest rates by 50 basis points in July, before raising rates by 25 basis points at the remaining meetings this year. However, 18 economists forecast a 50 basis point increase in September.

Most economists think interest rates will be around 2.5 – 2.75% or higher by the end of this year, 6 months earlier than forecast in the previous survey and almost in line with expectations of investors. the market about the interest rate range of 2.75 – 3%.

The above forecasted interest rate exceeds the neutral figure by 2.4%, which neither stimulates nor restricts economic activity.

Speaking on May 17, Fed Chairman Jerome Powell, reiterated that the Fed will raise interest rates to the necessary highs, possibly above neutral.

Inflation in the US is forecast to average 7.1% this year and remain above the Fed’s 2% target at least through 2024.

While economists surveyed forecast the possibility of a recession of the US economy in the next 2 years is 40% and next year is 25%.

In the first quarter of 2022, the US economy contracted for the first time since 2020 and is forecast to grow by 2.9% in the second quarter.

The growth rate is expected to average 2.8% in 2022, before slowing down to 2.1% in 2023 and 1.9% in 2024, while respective projections are given. in the previous month were 3.3%, 2.2% and 2%.

At the most recent policy meeting, the FED decided to raise the operating interest rate by 50 basis points to a new range from 0.75% to 1%. The decision to raise the operating rate by 0.5% marks the strongest increase made in a single meeting since May 2000.

Federal Reserve officials also hinted that they will continue to raise their key interest rates this year in an effort to contain inflation.

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