Fed done hiking rates, but higher for longer message gaining traction
U.S. Federal Reserve will keep its key interest rate on hold on Nov.
1 and may wait longer than previously thought before cutting it, according to economists in a Reuters poll, as the central bank's higher-for-longer message gains traction.
While a slight majority still see a cut before the middle of 2024, a significant minority of forecasters, around 45%, now see no rate reduction until the second half of next year or later, up from 29% in the last poll.
In the weeks since the Fed's September meeting where it opted to pause hiking rates, inflation surprised to the upside and payrolls unexpectedly rose by the most in eight months, providing some support for the roughly one-quarter of economists polled who expect another hike.
But financial conditions have also tightened since then, with yields on longer dated Treasury debt rising to multi-year highs. Several Fed officials have indicated that may work as a substitute to further rate rises, while still stressing rates will remain higher for longer.
More than 80% of economists, 90 of 111, in an Oct.
13-18 Reuters poll predicted the Federal Open Market Committee will hold rates in a 5.25%-5.50% range at the conclusion of its Oct. 31-Nov.
1 meeting.
That was in line with market expectations and, if realized, would be the first time in the current cycle that the Fed opted to pause for a second consecutive meeting.
Twenty-six of 111 saw one more rate hike this year, matching the Fed's median «dot plot» projections from last month. Only one saw two more hikes.
«Though recent upside surprises in September employment and CPI (inflation) suggest greater risk of further rate hikes, our base case remains that the Fed will remain on hold at the current rate...until June of next
