Fed to lift rates by 50 basis points, but peak policy rate may be higher – Reuters poll

“The Federal Reserve will downshift in December to deliver 50 basis-points (bps) interest rate hike, but economists polled by Reuters say a longer period of US central bank tightening and a higher policy rate peak are the greatest risks to the current outlook,” stated the latest survey.

Additional findings

Forecasts for inflation in the coming year and into next are slightly higher than thought one month ago, suggesting it is not time yet to consider an imminent pause in the Fed's tightening campaign.

The Fed is set to raise its federal funds rate by half a percentage point to the 4.25%-4.50% range at its Dec. 13-14 policy meeting, according to 78 of 84 economists who participated in a Nov. 14-17 Reuters poll.

16 of 28 respondents to an additional question said the bigger risk was that rates would peak higher and later than they expect now, with another four saying higher and earlier. The rest said it would be lower and earlier.

A majority of economists, 18 of 29, also said the bigger risk was that price rises would be bigger than they expected over the next six months.

While 22 of 30 economists said the recession would likely be shallow - the economy is forecast to grow just 0.4% next year as a whole - fears of a deeper downturn have prompted companies to cut thousands of jobs across the country.

Market implications

The survey details could be considered responsible for the latest rebound in the US Dollar, which in turn appeared responsible for the latest weakness in the Gold price.

Also read: Gold Price Forecast: XAUUSD eyes first weekly loss in three on hawkish Federal Reserve speakers, risk aversion