Fed to lift rates by 75 basis points in July, 50 bps in Sept: Poll

BENGALURU, June 22 (Reuters) - The Federal Reserve will deliver another 75-basis-point interest rate hike in July, followed by a half-percentage-point rise in September, and won't scale back to quarter-percentage-point moves until November at the earliest, according to economists polled by Reuters.
Last week the Fed hiked the federal funds rate by three-quarters of a percentage point, its largest rate increase since 1994, after official data just a few days earlier showed inflation unexpectedly rose despite expectations it had peaked.
The latest poll results, released on Wednesday before Fed Chair Jerome Powell was due to appear before the Senate Banking Committee as part of his twice-yearly monetary policy testimony to Congress, show momentum is still behind the US central bank doing more, not less, despite rising recession concerns and a steep sell-off in financial markets. Bond yields are up sharply and major Wall Street equity indexes are already trading in a bear market, defined as 20 per cent down from their peak.
In the June 17-21 Reuters poll, nearly three-quarters of economists, 67 of 91, expected another 75-basis-point US rate hike in July. That would take the fed funds rate to a range of 2.25 per cent-2.50 per cent, roughly the neutral level where the Fed estimates the economy is neither stimulated nor restricted.
A strong majority expect the central bank to hike its policy rate by another 50 basis points in September, with opinion more split on whether it will hike by 25 or 50 basis points in November. A majority expect the Fed to raise rates by 25 basis points at its December meeting.
That would take the fed funds rate to a range of 3.25 per cent-3.50 per cent by the end of this year, 75 basis points higher than thought in a poll published just two weeks ago.
Powell last week signaled that a pause in the current tightening cycle would only be possible after a meaningful decline in inflation, which currently looks to be a more distant prospect than thought just a few weeks ago.
"Since the Fed is still underestimating the inflation problem ... not recognizing that a wage-price spiral has already started, we expect they will have to raise rates faster than they now expect," Philip Marey, senior US strategist at Rabobank, wrote in a note.
"Unfortunately, the hiking path is also likely to be followed by a recession."
Reuters Poll- US economy and Federal fund rate outlook
Reuters Poll- US economy and Federal fund rate outlook
Inflation will remain above the Fed's 2 per cent target until at least 2025, according to its own projections and a separate Reuters poll.
Although the Fed was expected to shift down to 25-basis-point rate hikes in November, a significant minority, around 40 per cent, expected a 50-basis-point hike at that month's meeting. Only a handful said the Fed would pause its rate hikes at some point this year.