Economists surveyed by Bloomberg believe there will be two rate hikes in 2023, but the forecast released by the Federal Reserve on Wednesday will show that the median interest rate remains close to zero throughout 2023. Such results will be consistent with the FOMC's December forecast, although Congress has approved nearly $3 trillion in fiscal stimulus since then, in conjunction with accelerated deployment of the Covid-19 Vaccine, the U.S. economic outlook has greatly improved. "The Fed is now exploring unknown areas because large-scale fiscal stimulus, monetary support and pent-up consumer demand during the pandemic, coupled with the extensive deployment of vaccines, will drive the economic outlook to rebound."
Almost certainly, FOMC will keep interest rates near zero and guarantee continued purchases of assets (QE) at the current $120 billion per month.
Rate hike time: Economists expect the Fed to raise interest rates for the first time in 2023 _By Bloomberg
Powell repeatedly stressed that the U.S. labor market is still far from the central bank's goal of full employment, so it is too early to discuss the Fed's revocation of relevant support measures.
Even so, three-quarters of economists predict that the central bank will have to raise interest rates by the end of 2023, and the median expectation of the respondents is a rate hike of about 50 basis points. By contrast, the median surveyed by Bloomberg in December was to raise interest rates until 2024 or later. "Although economic forecasts change, we do not expect interest rate expectations to change much. In fact, while some points may drift higher on the dot chart, we expect the committee to stick to the bottom line and not acknowledge any changes in the rate hike schedule."
FOMC may continue to predict interest rates to maintain current levels in 2023. The dot map distributed in December last year showed that an official expected a 25 basis point rate hike in 2022, while five officials predicted a hike in 2023.
▉ Economic Forecast
41 economists believe that FOMC's first economic forecast this year will raise expectations of economic growth and inflation. The Fed may predict economic growth rate this year at 5.8%, higher than the December forecast of 4.2%. Inflation is expected to be slightly raised. The unemployment rate is also expected to fall to 5.0% by the end of the year, the same as the December forecast.
So, Nathaniel Kalp, chief U.S. economist at BBVA, said: "When we just started talking about how much inflation will rise and how much unemployment will fall, the possibility of predicting interest rates will rise seems very small. The Fed must see, feel it, not just guess."
▉ yields rise
As economic growth expectations rise, U.S. Treasury yields have risen sharply in the past month, which has attracted the attention of the central bank. Powell and other officials attributed the dynamic to improvements in the outlook and said they did not seem to be upset.
survey found that FOMC is unlikely to highlight the risks of tightening financial conditions in its statement or strengthen forward-looking guidance on interest rates or bond purchases.
rises: 2% is the next target after a rapid rise in U.S. Treasury yields _By Bloomberg
FOMC has promised to continue its current QE plan until employment and its 2% inflation target "major further progress has been made." "FOMC will remain on the wait-and-see state for the time being, and declare the tone, and the time for interest rate hikes or inflation expectations will not change significantly at this meeting."
▉ reduction QE
Powell said the economy is not close to the necessary progress to trigger the turn of bond purchase plans, and he promised to hint at any reduction measures in advance.The vast majority of economists believe that this will not happen until 2022.
Most economists surveyed do not want any recent changes, such as switching to buying long-term Treasury bonds. They say it is even less likely to change the asset purchase structure of Treasury and mortgage-backed securities, or set a target for Treasury yields, namely yield curve control (YCC).
▉ Other measures
Occasionally the Federal Reserve will make technical adjustments to the interest rate of excess reserves, which will not affect monetary policy. However, most economists do not expect this meeting to be adjusted.
▉ Powell's re-election
Powell's term is scheduled to end in February next year. Economists say his highly easing policy could allow him to be re-election. About three-quarters of people expect it to be re-election, which is provided with the results of the last investigation.
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