Fund managers are expecting the Federal reserve to raise interest rates by 0.25% on Wednesday in what in all likelihood be a series of five to seven rate hikes throughout the year to combat 7.9% inflation.
These hikes are likely to progress towards a peak funds rate of 2.4%, which would be the Fed’s neutral rate, though some analysts forecast that the Fed may have to go beyond neutral to get inflation under control.
Analysts and fund managers surveyed by CNBC expect inflation to reach 8.5% in March before declining to 5.2% in December.
“We might be on the cusp of the Fed raising rates at the same time there is a minus sign in front of GDP,” wrote Peter Boockvar, chief investment officer of Bleakley Advisory Group in the survey. “What an awful position to be in, but until inflation falls sharply, they have no choice but to carry on.”
The last time interest rates were at 2% was in October 2019 and the highest rates have reached in the last decade was 3% in December 2018.