Economists Expect the Fed to Reveal Another 25bps Rate Hike Before Pausing for the Rest of 2023

Economists Expect the Fed to Reveal Another 25bps Rate Hike Before Pausing for the Rest of 2023

After the March rate hike by the Federal Reserve, economists believe that the recent move by Saudi Arabia and several members of the Organization of the Petroleum Exporting Countries (OPEC) to cut oil production could complicate the central bank’s mission. Additionally, the majority of the market is pricing in another 0.25% increase for the May 3 meeting of the Federal Open Market Committee (FOMC), and several analysts suspect it may be the last hike for quite some time. Economists Attempt to Predict Fed’s Next Decision — ‘Peak Rates Are in Sight’

This week, market investors are focused on several factors, including the Consumer Price Index (CPI) report and earnings reports from some of the largest banks in the United States. However, one of the biggest factors investors are eyeing will take place in 23 days when the Federal Open Market Committee (FOMC) meets to potentially raise the federal funds rate. According to statistics from CME Group’s Fedwatch tool, there is a 66% chance the Fed will raise the rate by 25 basis points (bps). Conversely, there is a 34% chance the Fed won’t raise the rate in May, and some believe that after a 25 bps rate hike, May will be the last increase for 2023.

Although the Federal Open Market Committee (FOMC) will be monitoring this week’s CPI report, senior economist Sarah House at Wells Fargo described how the recent decision by Saudi Arabia and OPEC to cut oil production could affect the Fed’s future policy. “The Fed sees OPEC decisions as mostly geopolitical, but they can impact production of goods and the transportation of other items, so those higher oil prices can bleed into that core component, which the Fed does tend to focus on a little bit more in terms of setting policy,” House explained to CNN reporter Bryan Mena.

Economists surveyed by Bloomberg Economics expect the federal funds rate to reach 5.25% at the end of 2023. Economist Anna Wong stated in the forecast, “We expect the Fed will hike by another 25 basis points at its May meeting, when the upper bound of fed funds rates reaches 5.25%. With the recent production cuts by OPEC+ and the still-tight U.S. labor market, inflation will likely remain in the vicinity of 4% in 2023, and keep the Fed from rate cuts, as markets currently foresee.” Wong added: We see the Fed holding rates at the peak level for the duration of this year, even as a mild recession is likely to develop in late-2023.

Portfolio manager Michele Morra at Moneyfarm believes that investors have shifted their focus away from inflation and are now fixated on a recession. With inflation slowing down and “even if taking into account a more dovish monetary policy, the main focus is recession,” Morra opined. Bloomberg economist Tom Orlik believes that the interest rate will soon peak for various reasons.

Economist Tom Orlik told Bloomberg Economics, “Since the start of the year, central banks have been buffeted by rival forces. Faster China reopening, Europe dodging a downturn, and tight U.S. labor markets all argue for higher rates. The collapse of Silicon Valley Bank and Credit Suisse pull in the opposite direction. So far, with limited signs of a broader banking crisis, it’s the arguments for tightening that are winning the day. Peak rates are in sight, but we’re not quite there yet,” the economist added. Tags in this story Anna Wong, Banking Crisis, Benchmark Rate, Bloomberg Economics, Bryan Mena, Central Bank, China reopening, CME Group, CNN, credit suisse, Decision Making, economics, Europe, Fed, Federal Funds Rate, Federal Reserve, Fedwatch tool, Focus, Forecasts, inflation, interest rate, Investors, market, May meeting, Michele Morra, Monetary Policy, Moneyfarm, oil production, opec, peak rates, portfolio manager, Rate Hike, Recession, Saudi Arabia, senior economist, Silicon Valley Bank, Statistics, Tom Orlik, U.S. labor markets, Wells Fargo

What do you think about the economists’ predictions? What do you think the impact of the recent OPEC+ oil production cuts will be on the Fed’s future policy decisions, and how will it affect the economy and financial markets? Share your thoughts about this subject in the comments section below. Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today. JPMorgan CEO Jamie Dimon Says Banking Crisis Not Over — Warns of "Repercussions for Years to Come" ECONOMICS | 28 mins ago French President Emmanuel Macron States Europe Must Reduce Its Dependence on the US Dollar to Avoid Becoming "Vassals" ECONOMICS | 2 hours ago

Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleBitcoin, Ethereum Technical Analysis: BTC Jumps Back Above $28,000, Following Easter Break Next articleBiggest Movers: DOGE, SHIB Consolidate to Start the Week Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItRipple CEO: SEC Lawsuit Over XRP "Has Gone Exceedingly Well"

The CEO of Ripple Labs says that the lawsuit brought by the U.S. Securities and Exchange Commission (SEC) against him and his company over XRP "has gone exceedingly well." He stressed: "This case is important, not just for Ripple, it’s ... read more.Goldman Predicts US Recession Odds at 35% in 2 Years, John Mauldin Wouldn"t Be Surprised if Stocks Fell 40% Iran to Increase Penalties for Unauthorized Cryptocurrency Mining Ethereum Foundation"s Financial Report Discloses It Holds $1.6 Billion in Assets, 80.5% Held in Ether Terra"s Algorithmic Dollar-Pegged Crypto UST Is Now the Third-Largest Stablecoin