The Fed will announce its interest rate decision in the early morning of September 22, Beijing time. Wall Street now expects a 20% chance of the Fed raising interest rates by 100 basis points and an 80% chance of announcing a 75 basis point increase. In addition, economists surveyed by Bloomberg say fed officials will send a tougher signal next week that interest rates will reach 4% by December and remain at that high level until 2023.

The terminal interest rate will reach 4.25%?

The Fed is expected to raise interest rates by 75 basis points for the third time next Thursday, according to the survey. This will raise the benchmark target range of policy interest rates to 3%-3.25%. Forecasts released by the fed at this meeting are expected to show that the upper limit of the interest rate range is 4 per cent by the end of the year, will continue to rise slightly next year, and will fall back to 3.6 per cent when interest rates are cut in 2024.

The forecast is much higher than the Fed forecast in June, reflecting the Fed's tougher crackdown on inflation after higher-than-expected CPI growth in August.

Powell, chairman of the Federal Reserve, has said that the Fed is firmly committed to bringing inflation back to 2 per cent and will not stop its efforts prematurely in the face of weak economic data. The stronger-than-expected US CPI data for August released on Tuesday reinforced the case for more aggressive action.

Robert Dent, senior US economist at Nomura Securities International, said: "We expect the Fed to continue to raise interest rates until the inflation rate falls, and the August CPI data add great urgency to the Fed's task. The longer inflation stays high, the more people worry about spiralling wage prices and / or rising inflation expectations that cannot be anchored. "

Bank of America Corporation expects the Fed to raise interest rates by 75 basis points next week, as the higher-than-expected CPI data in August outweighed the decline in PPI data. "We now expect the Fed to raise interest rates by 75 basis points in September and 50 basis points in November, followed by 25 basis points in December and February, with final interest rates reaching 4.00-4.25 per cent," Bank of America Corporation said in an investor report. "

Bank of America Corporation added: "We think the Fed will signal early next year to raise the terminal fund interest rate to 4.0-4.25 per cent, 37.5 basis points higher than in June. We expect the statement from the Federal Open Market Committee (FOMC) to say that monetary policy will enter a restricted zone and the committee is expected to remain so 'for some time', similar to the tone of Chairman Powell's speech in Jackson Hole. "

"the 'bitmap' will show that terminal interest rates will be higher in 2023," said Wong, Bloomberg's chief US economist. We think the terminal interest rate will rise to about 4.2%, compared with 3.8% in September and June. Moreover, interest rates will not fall as sharply in 2024 as expected in September and June. Interest rates are likely to fall to around 3.8%-4% in 2024, compared with 3.4% expected in September and June. "

The dot matrix will be the focus.

Mr Powell has been vague about how high interest rates might rise and said in July that the Fed would set policy "on a meeting-by-meeting basis". As a result, the bitmap forecast of the target interest rate will become the main focus of investors at next week's meeting.

Economists expect the interest rate path set by the FOMC next week to be less aggressive than the market expected. Investors fully priced the Fed will raise interest rates by 75 basis points next Wednesday and expects rates to rise by a further 1 percentage point to around 4.23 per cent by the end of the year. Economists' own forecasts are largely in line with their forecasts from the Fed's "summary of economic forecasts" that interest rates will peak at 4% in December and then fall in 2024.

Mr Powell is trying to steer the US economy towards a "soft landing", in which economic growth slows, the labour market remains strong and inflation weakens. This will be reflected in FOMC's growth forecasts for 2022 and 2023, both of which are sharply lower than in June, and the unemployment rate will rise from 3.7 per cent reported in August to 4.2 per cent in 2024, according to the survey.

Hugh Johnson, chairman of Hugh Johnson Economics LLC, said: "Fed policy remains focused on inflation and there is little evidence that policy will respond to a slowdown in economic / employment data or a decline in inflation."

Inflation remains a central issue driving Fed policy. The FOMC is likely to maintain its forecast for inflationary pressures and expects inflation of 5.2 per cent in 2022, 2.6 per cent in 2023 and 2.2 per cent in 2024. This means that the Fed will not be able to meet its long-term inflation target of 2 per cent until 2025.

Powell stressed that the Fed will remain flexible in its plan to raise interest rates, while the FOMC has only provided appropriate loose guidance for sustained rate hikes in its previous statement. 3/4 of economists expect FOMC to reiterate this guideline, while most others think FOMC is likely to say that the pace of interest rate hikes is expected to slow, echoing Powell's recent public statement.

2/3 of economists also expect a unanimous decision this month that FOMC will maintain a United front in Powell's fight against inflation.

What's the plan to shrink the table?

The Fed's plan to shrink its balance sheet is less clear. This month, the amount of withdrawal allowed for maturing securities has risen to about $1.1 trillion a year. Economists expect the balance sheet to shrink to $8.4 trillion by the end of the year and to $6.6 trillion by December 2024, according to the median forecast.

Nearly half of respondents said Fed officials would resort to direct sales of mortgage-backed securities, in line with their long-term tendency to hold only US Treasuries. Among those economists who expect to sell, there is a great deal of disagreement about when to start selling, with a slight majority believing that it will start in the second quarter of 2023.

Can the US economy make a soft landing?

Wall Street economists continue to express concern about the possibility of a recession in the United States. Under the influence of adverse factors such as rising food and energy prices caused by the war between Russia and Ukraine, the Federal Reserve tightened monetary policy.

Kathy Bostjancic, chief US economist at the Oxford Institute of Economics, said: "We believe that longer duration, higher inflation, greater Fed monetary policy tightening and the negative spillover effects of global economic weakness will push the US economy into a mild recession in the first half of 2023."

Economists have different views on the outlook for the US economy, with 49% believing that there may be a recession in the next two years, 33% believe that there may be zero or negative growth in the coming period of time, and the rest believe that the Fed will achieve a soft landing of sustained growth and low inflation.