On June 9, Reuters reported that a survey conducted from June 4 to 9 among 102 economists revealed that 72 respondents expect the Fed's benchmark interest rate to remain in the current range of 3.50% to 3.75% through the end of the year. This represents about 70% of those surveyed.
The proportion of respondents predicting a hold has increased significantly from less than half in last month’s survey and about one-third in the previous one. Reuters noted, "This survey marks the first clear majority opinion confirming expectations for a rate hold this year."
No economists anticipated a rate cut at the upcoming Federal Open Market Committee (FOMC) meeting scheduled for June 16-17, which will be chaired for the first time by Kevin Warsh, the newly appointed Fed Chair.
Inflation rates have risen to nearly double the Fed's target of 2%. According to a separate Reuters survey, the consumer price index in the U.S. is expected to show a 4.2% increase in May, marking the highest level in over three years.
The Fed's preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, also rose by 3.8% year-over-year in April, the highest since May 2023. The Reuters survey projected PCE inflation rates of 3.9% for the second quarter, 3.8% for the third quarter, and 3.6% for the fourth quarter.
Strong employment data has further weakened the outlook for rate cuts. The employment figures released last week for May were stronger than expected, reducing the likelihood of a rate cut due to economic slowdown concerns.
The futures market is pricing in at least one rate hike by the end of the year. Some Fed officials have also indicated that rates may be raised later this year.
Growth and employment forecasts have not changed significantly. The Reuters survey indicated that the U.S. unemployment rate is expected to remain around 4.3%, with economic growth projected to average about 2% over the next few years.
* This article has been translated by AI.
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