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By Prerana Bhat and Indradip Ghosh
BENGALURU (Reuters) - The U.S. Federal Reserve will lift interest rates higher by the end of this year than anticipated just a month ago, keeping alive already-significant risks of a recession, a Reuters poll of economists found.
While U.S. inflation, running at a four-decade high, may have peaked in March, the Fed's 2% target is still far out of reach as disruptions to global supply chains continue to keep price rises elevated.
The May 12-18 Reuters poll showed a near-unanimous set of forecasts for a 50-basis-point hike in the fed funds rate, currently set at 0.75%-1.00%, at the June policy meeting following a similar move earlier this month. One forecaster anticipated a hike of 75 basis points.
The Fed is expected to hike by another 50 basis points in July, according to 54 of 89 economists, before slowing to 25- basis-point hikes for the remaining meetings this year. But 18 respondents predicted another half-percentage-point rise in September too.
A majority of poll respondents now expect the fed funds rate to be at 2.50%-2.75% or higher by the end of 2022, six months earlier than predicted in the previous poll, and roughly in line with market expectations for a year-end rate of 2.75%-3.00%.
That would bring it above the "neutral" level that neither stimulates nor restricts activity, estimated at around 2.4%.
"The pressing goal is to bring policy rates to neutral, before stepping back to judge the impact," Sal Guatieri, senior economist at BMO, wrote in a note.
"The Fed can only hope that inflation pressure stemming from high commodity prices and the pandemic's impact on labor and material supplies will reverse soon."
Graphic - Reuters Poll-US monetary policy outlook: https://fingfx.thomsonreuters.com/gfx/polling/egvbkwmydpq/Reuters%20Poll-US%20monetary%20policy%20outlook.png
Fed Chair Jerome Powell on Tuesday reiterated that the U.S. central bank would ratchet up interest rates as high as needed, possibly above the neutral level.
Nearly 75% of respondents to an additional question in the poll - 29 of 40 - said the Fed's rate hike path was more likely to be faster over the coming months than slower.
Inflation, as measured by the Consumer Price Index (CPI), was forecast to average 7.1% this year, and remain above the central bank's target until 2024 at least.
The New York Fed's latest global supply chain pressure gauge rose in April after four months of declines, suggesting those price pressures remain very much alive, as did a recent Reuters analysis.