The Federal Reserve tried to do interest rate hikes four times in 2016, but all efforts in vain as they were forced to cancel them. But this year, even economists are with the Fed for the rate hike.
Bloomberg recently took a survey on 7th and 8th March of 45 economists, the results of which estimate a three quarter point hike this year expected in March, June, and December. Now their survey matches the forecast by the Fed policy makers in December and up from their previous estimate of two hikes in February.
The investors also agreed to the Fed’s forecast and central bankers have also showed positive economic data and positive remarks about the hike. Janet Yellen, the current Fed Chair said in her March 3rd speech that that this hike is going to be discussed in the meeting of Open Federal Committee on 14th-15th March if the economy stays constant. New rate forecasts and projections would also be discussed in the March meeting.
The surveyors also lifted their own projections for the fed funds rate of 2018 and 2019 by a minimum of a quarter point, which also matches the expectations by the Fed.
The upper bound of benchmark rate is expected to peak this cycle at 3% in Q2 of 2019, according to the economists’ expectations.
This shift brought economist expectations closer to that of the fed. There is also a rising concern among the economists that the economic growth and the inflation could be a little higher than the earlier expectations. 55% of the surveyors think that the risks are on the upside, while 13% think the downside risks are serious and a third of them agree with the Federal Reserve’s expectations and think that these risks are balanced.
With the fiscal policies and other government programs by the Trump administration, about 62 percent respondents have an expectation of a net economic impact, which is positive for those government programs, whether it is healthcare policies, trade policies, fiscal policies, immigration policies or others. According to 15% of them, the effect is going to be neutral and rest of them foresee the impact to be negative on the entire economy.
In the comments in the survey by the economists, the fiscal policy was the main uncertainty source. The respondents even mentioned the risks in the future of US economy even after the promises by Trump for delivering growth.
There is a 15% chance that Donald Trump would reappoint Fed Chair Janet Yellen next year for four more years. Trump had praised her for her stand at keeping interest rates low at first, but then he criticized her during his campaign for the same. With Yellen’s new outlook for the rate hike, Trump praises her yet again.