Confused about where Fed policy is headed? Don’t worry. Professional forecasters are, too.

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If you’re confused about where interest rates are going to end in 2023, you’re not alone. A new survey by the National Association for Business Economics shows a wide divide among their members as to whether rates will be higher or lower.

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Earlier this month, the Fed raised its benchmark rate by half a percentage point to 0.75%-1%. This was the biggest increase since 2000. Fed Chairman Jerome Powell said the central bank is set to raise its policy rate by the same amount in June and July, bringing the federal funds rate from 1.75% to 2% by August.

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When asked where the Fed’s benchmark policy rate would be by the end of 2023, the lowest of five average forecasters predicted the Fed would reverse course and reduce its policy rate to just under 1%.

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, More than a third of economists surveyed by NABE said they thought inflation peaked in the first quarter. ,

The top five average forecasts, in contrast, call for the Fed to continue reducing its policy rate to just under 4%.

The full sample median expected the Fed’s policy rate to get to 3% by the end of next year.

The survey of 53 professional forecasters was conducted in early May.

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It is expected to increase to 3.25% over the same period.

One thing economists agreed on: The Fed won’t get inflation back to its 2% target until 2024 or later, the survey showed.

The good news is that most economists expect inflation to peak this year. In fact, more than a third of economists believe inflation peaked in the first quarter.
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Fed will be successful in bringing inflation down in next few years, says Bernanke

There was a lot of discussion about a possible recession in the survey. More than half of economists believe there is at least a 25% chance of a recession next year.

Fed policy was seen as the biggest downside risk to the US economy, followed by a global growth slowdown caused by Russia’s invasion of Ukraine.

More than 75% of economists said the risks to economic growth during the year were weighted downwards.

Economists polled cut their annual GDP forecast to 1.8% in February from their previous estimate of 2.9% annual growth. The economy is projected to rebound at a growth rate of 2.3% in 2023.

The unemployment rate was expected to remain stable at 3.6% over the next 18 months.

Credit: www.marketwatch.com /

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