The US Federal Reserve (Fed) will end its monetary tightening cycle after raising 25 basis points at each of the next two meetings. After that, according to most economists polled by Reuters, rates are likely to remain stable, at least until the end of the year. Fed officials generally agree that US central bank the pace of tightening should be slowed down to assess the impact of the rate hike. The Fed raised its key interest rate by 425 basis points last year, with most of the tightening coming at 75 and 50 basis points. And while inflation continues to ease, more than 80% of analysts predicted the Fed would continue a slight 25 basis point hike at the January 31-February 1 meeting. If they are confirmed, the interest rate will rise to the range of 4.50-4.75%. The rest of the analysts are seeing a 50 basis point gain in two weeks, but only one of them comes from a US bank that works directly with the Fed.

The Fed’s key interest rate is expected to peak at 4.75%-5.00% in March, according to 61 out of 90 economists. This was in line with interest rate futures prices, but was 25 basis points below the 2023 median in bank executives’ forecasts after the December 13-14 session. “U.S. inflation shows that price pressures are easing, but in a busy labor market environment, the Fed is likely to choose not to talk about raising interest rates,” ING chief economist James Knightley said in a note.

The expected higher interest rate will more than double the rate during the latest tightening cycle and be the highest since mid-2007, just before the global financial crisis hit.

However, there was no clear consensus on where the Fed’s key interest rate would be at the end of 2023, but about two-thirds of respondents indicated levels of 4.75-5.00% or higher. Inflation is estimated to fall further but remain above the official 2% target in the coming years.

In conclusion, more than 60% of respondents said that the Fed would rather keep interest rates at the same level, at least until the end of the year, than cut them.