Most major academic economists surveyed by foreign media said that in order to curb high inflation, the Federal Reserve will raise the federal funds rate to more than 4% and maintain it after 2023.

Most of the major academic economists surveyed by foreign media said that in order to curb high inflation, the Federal Reserve will raise the federal funds rate to more than 4% and remain at this level after 2023.

market is expected to raise interest rates for the third time this Thursday, and this will increase the target range of the federal funds rate to between 3% and 3.25%. Among the 44 economists surveyed by foreign media from September 13 to 15, nearly 70% believe that the peak of federal funds rate in this tightening cycle will be between 4% and 5%, and 20% of them even believe that it may exceed this level.

UC Irving professor Eric Swanson said:

"Policy makers have not yet agreed on how much they need to raise the federal funds rate to. I expect the federal funds rate to eventually reach between 5% and 6%. If the Fed wants to cool the economy now, then the federal funds rate needs to be higher than core inflation (i.e. PCE, the inflation indicator that the Fed is most concerned about)."

The Fed usually sets the PCE target at 2%, while also paying close attention to the Consumer Price Index (CPI). The U.S. core CPI rose unexpectedly by 0.6% in August, up 6.3% from the same period last year.

Most respondents expect the US core PCE to drop from the 4.6% level in July this year to 3.5% by the end of 2023. Nearly one-third of respondents expect that the value will still exceed 3% in the same period next year. Another 27% of respondents said that the value will be at a high of more than 4%. This shows that people are very panicked about the growing deeper embedding of high inflation into the economy.

More than one-third of respondents warned that if the Fed does not raise the federal funds rate to more than 4% by the end of this year, inflation will not be effectively controlled.

68% of respondents said that cooling inflation, instability in financial markets and deterioration in labor markets are the most likely reasons for the Federal Reserve to suspend tightening policies, but they expect the Federal Reserve to cut interest rates until 2024 at the earliest. Among them, 25% of respondents expect the Federal Reserve to cut interest rates until the second half of 2024 or later.

Nearly 70% of respondents expect the National Bureau of Economic Research to announce the U.S. economy in recession in 2023, most of them believe this will happen in the first or second quarter next year. Most economists believe that the U.S. recession may last for two or three quarters, with more than 20% of respondents expecting the U.S. recession to last for four quarters or more. According to 57% of respondents, at the peak of the recession, the U.S. unemployment rate may stabilize between 5-6%; one-third of respondents believe that it may exceed 6%, both far higher than the current level (3.7%).

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