Interest rates could increase to 5.25 percent in US but ‘end of rate hike cycle’ in sight

Interest rates could increase to 5.25 percent in US but ‘end of rate hike cycle’ in sight

UK Economists are warning another interest rate increase from the Federal Reserve is likely. The US Federal Reserve is likely to raise interest rates once again, according to economists surveyed by Reuters. It is forecast that the central bank will increase rates by around 25 basis points when the Federal Open Market Committee reconvenes next month.

Over the past year, the Federal Reserve has hiked interest rates in an attempt to mitigate the impact of inflation. Following last month’s intervention, the Federal Funds rate rose to a target range of 4.75 to 5.0 percent. During its March 21-22 meeting, the Fed warned of a potential economic downturn and voiced concerns over volatility in the banking sector.

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Almost 90 percent of the 105 economics polled by Reuters predicted a rate rise of 0.25 percent.

If this were to be implemented, interest rates would be sitting between five to 5.25 percent, in line with market pricing. Some 59 of the surveyed economists expect the Federal Reserve to keep its policy rate unchanged through to at least the end of 2023.

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In comparison, only 26 respondents to the poll forecast a cut to interest rates before the end of the year. Earlier this month, Consumer Price Index (CPI) inflation fell to five percent which is the lowest it has been since 2021.