The US Federal Reserve is expected to leave its benchmark rate in a 3.75 percent to 4.00 percent range at its October 27-28 meeting, then raise it a quarter point in December, according to a Reuters poll of 100 economists conducted between October 16 and 20. Of those surveyed, 94 expect the hold, in line with market pricing, and all 100 expect a December increase, up from fewer than half in the September poll.
The Federal Open Market Committee raised rates by 25 basis points in September in a unanimous vote. The October meeting falls days before the November midterm elections. Nearly 60 percent of forecasters see the policy rate peaking in a 4.00 percent to 4.25 percent range, while 38 of 92 predict at least two further increases, up from one-fifth in the September survey, Reuters reported.
"You have a strong economy and you have inflation. There's really no reason for you to worry so much about getting interest rates higher, this is like the easiest choice," Alex Pelle, senior US economist at Mizuho Securities, told Reuters, adding that skipping October was the wrong call from a policy point of view. Inflation has run above the Fed's 2 percent target for nearly six years, and poll medians show the Personal Consumption Expenditures Price Index staying more than 100 basis points above 2 percent over coming quarters, not returning to target until at least 2028.
Higher energy costs tied to the US war with Iran, along with new tariffs on imported goods, have pushed living costs up, with oil holding above $100 a barrel, Reuters reported. With prediction markets pricing an 86 percent chance of a hold, the real drama now centres on whether December brings a quarter-point or a half-point move.