Fed To Raise Rates 25bp In March But Calls For 50bp Grow (RTRS Poll)

The U.S. Federal Reserve will kick off its tightening cycle in March with a 25-basis-point interest rate rise, a Reuters poll of economists found, but a growing minority say it will opt for a more aggressive half-point move to tamp down inflation. While inflation is rising across the globe, it is particularly hot in the United States, hitting a 40-year high last month. That is putting pressure on the Fed to not only raise rates from a record low but also to reduce its nearly $9 trillion balance sheet, drastically inflated by emergency bond purchases as the Fed resuscitated the economy from COVID-19 pandemic damage. Now that the economy has recovered its pre-pandemic level, all 84 respondents in a Reuters poll taken Feb. 7-15 expected the Fed to raise the federal funds rate by at least 25 basis points at its upcoming March 15-16 meeting. Almost a quarter of those respondents, 20, forecast a 50-basis-point move to 0.50-0.75% following debate in markets over the past week after Fed officials discussed the merits of such a move. Rate futures are pricing in more than a 50% likelihood of a half-point hike.