Investors See More Fed Rate Hikes and No Cuts Until 2024, Poll Shows

(Bloomberg) — Investors expect the US Federal Reserve will keep raising interest rates, with most not anticipating cuts to begin until well into 2024.

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According to 70% of the 223 respondents to an Instant MLIV Pulse survey, Chair Jerome Powell and colleagues have not yet completed the rate-hiking campaign that began in March 2022 after inflation surged amid the pandemic. Thirty percent said rates have topped out.

The poll of Bloomberg terminal users was conducted in the hours after the Federal Open Market Committee left the benchmark US rate in a range of 5% to 5.25% following 10 straight increases. But officials signaled they would likely resume tightening at some point in a bid to control prices.

Asked when the Fed will start reducing rates, about 56% said it won’t do so until the second quarter of 2024 or beyond, while around 35% penciled in a decrease in the opening three months of next year. A 10th predicted the fourth quarter of 2023.

Powell on Wednesday said rate cuts are probably a couple years out. Treasuries declined modestly on Thursday, with 10-year yields rising two basis points to 3.81%. Swaps traders see about a 50% chance that the Fed rate will be 25 basis points higher at year-end, after almost fully pricing in a rate cut at the start of June.

Sixty-one percent of those polled said tighter monetary policy will ultimately cause a recession at some point in the next year.

Investors were almost evenly divided over whether the yield on the Treasury 10-year note had peaked for this year after it set a 2023 closing high of 4.06% in March.

Almost 60% said the dollar, as measured by a Bloomberg index, will be within 5% of its current value at the end of this year. The rest of the respondents were roughly split over whether the currency would gain or decline by more than 5%.

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With an inflation rate that is still more than twice the central bank’s 2% target, policymakers are clearly not yet willing to declare victory in their push to regain control of prices.

In their post-meeting statement, officials said they would determine “the extent of additional policy firming that may be appropriate.” Quarterly Fed forecasts released Wednesday show borrowing costs rising to 5.6% by year-end, according to the median projection, compared with 5.1% seen in the prior version.

Officials justified their pause by saying it would let them “assess additional information and its implications for monetary policy.”

The MLIV Pulse survey of Bloomberg News readers on the terminal was conducted by Bloomberg’s Markets Live team, which also runs the MLIV Blog. Click here to sign up for future surveys.

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