The U.S. Federal Reserve will hold its key interest rate steady this year despite an expected recession, according to a Reuters poll of economists, who also said the risk of a U.S. default over the debt ceiling was higher compared to prior stand-offs.
Those concerns, along with failures of some regional banks, led markets to price in at least a 50 basis point cut by end-2023, an expectation that gained momentum after policymakers signaled a pause to the rate hiking campaign at the May 2-3 meeting.
However, U.S. central bankers reiterated the federal funds rate would stay high or could go even higher, not lower, despite 34 of 46 respondents to an additional question in the May 11-16 Reuters poll predicting a U.S. recession in 2023.
Read More : Reuters Poll: Fed to Maintain Unchanged Rates Throughout the Year; High Risk of U.S. Default