Experts predict an increase of the Fed’s rate to 1.75-2%

Investing.com – The overwhelming majority of experts believe that the Federal Reserve System (FRS) will raise the interest rate on federal funds (federal funds rate) following a two-day meeting, which ends on Wednesday.

The market estimates the chances of raising the rate at the June meeting to 1.75-2% per annum from the current 1.5-1.75% in more than 90%, according to the CME Group.

All  37 economists, who participated in the survey conducted by the agency Bloomberg, are waiting for  rates increasing.

At the same time, the share of respondents expecting at least three more increases in 2018, slightly decreased compared to March. The median estimate of economists now implies two more increases this year, which coincides with the Fed’s own forecasts, also published in March.

“GDP growth rates in the second quarter may be 4%, but before that there was a very weak first quarter,” says chief economist Loomis Sayles & Co. Brian Horrigan. According to him, fears over trade disputes, steadily sluggish inflation, strengthening the dollar and tensions in emerging markets can also deter the Fed from a more aggressive reaction.

In addition, after the meeting, representatives of the US central bank will publish new quarterly macroeconomic forecasts and an updated forecast for the further interest rate trajectory. Then Chairman of the Federal Reserve Service Jerome Powell will start his second press conference after taking office in February.

Many experts expect that the Central Bank’s management will improve forecasts of consumer price growth, as well as the economy as a whole, and may increase the forecast of the number of rate increases in 2018 to four (including March and June) against the backdrop of accelerating inflation and an active rise in the labor market. Point charts of forecasts (dot plots), published by the Fed in March, indicated that the Fed proposes to raise the rate three times in 2018.

The Fed in late 2015 raised the base interest rate for the first time in almost 10 years, in 2016 the rate was raised once (by 25 basis points), in 2017 – three times by the same amount. In March 2018, the rate was raised again.