Fed Rate Hike Now Likely
Economists See More Hikes Ahead
The Federal Reserve is now widely expected to raise interest rates this week, marking a sharp shift in economists' expectations following stronger-than-expected inflation data.
According to a Reuters poll, 85% of economists surveyed expect the Fed to raise its benchmark rate by 25 basis points to a range of 3.75%–4.00% at its September 15–16 meeting. This would be the first rate increase since July 2023.
Expectations have changed significantly from the previous week, when more than two-thirds of economists expected the central bank to keep rates unchanged. The latest inflation figures, combined with stronger economic data, have increased pressure on policymakers to act.
Economists are also increasingly expecting further tightening. Nearly 53% of forecasters in the Reuters survey see at least one additional rate increase by the end of March 2027. Interest-rate futures are also pricing in a high probability of further increases.
Persistent inflation remains a major concern for the Fed. Rising crude oil prices above $100 a barrel and elevated diesel prices are adding to inflation expectations, while the 10-year U.S. Treasury yield is holding close to 5%.