Fed Rate Hike Cycle to End After One More Increase: Survey

Federal Reserve Board Chairman Jerome Powell (Photo: Bloomberg)

The Federal Reserve will bring the current cycle of interest-rate increases to an end after one more hike later this year, according to a new Bloomberg survey of economists.

The median of responses in the March 13-15 poll predicted one hike in September, compared with two 2019 increases forecast in the December survey. They also said that would likely mark the peak of this hiking cycle, with the upper end of the target range for the benchmark rate touching 2.75 percent. Just three months ago they saw that peak at 3.25 percent.

None of the 32 respondents anticipated a rate move when the Federal Open Market Committee gathers in Washington March 19-20. Fed officials have repeatedly signaled they are content to leave rates unchanged this month and perhaps well into 2019.

“The Fed appears to be on hold for the foreseeable future,” said Scott Brown, chief economist at Raymond James Financial Inc. “Economic growth is expected to moderate this year, but risks are weighted to the downside.”

Investors continue to be even more skeptical over the likelihood of rate increases this year. Pricing in interest-rate futures contracts implies the possibility, though not the probability, of a cut in 2019.

Economists also predict policy makers will lower their own projections for the path of rates over the coming three years, removing one previously projected hike. They expect only modest changes to economic forecasts from the FOMC compared to those submitted in December, including a downgrade to the 2019 growth outlook to 2.2 percent from the 2.3 percent pace that policy makers had previously projected.

Assessing the pivot made by Fed officials in January toward a more dovish policy stance, economists assigned most of the shift to financial market turmoil and the weakening prospects for global growth. In comments submitted with the survey, several economists also pointed to weak inflation. The group largely dismissed President Donald Trump’s heavy criticism of Fed rate hikes as a factor.