US recession risk edges up, Fed may deliver fewer hikes: poll

The Federal Reserve is still expected to raise interest rates over the next year, but a majority of economists see the pace slowing.

That’s according to the latest poll by Reuters.

The Fed is expected to raise again next month and three times next year.

The probability of a U.S. recession in the next two years, while still low, also nudged up to a median 35 percent from 30 percent.

Growth in the world's largest economy is still solid, supported by the $1.5 trillion tax cut boost, and unemployment is the lowest in nearly half a century.

But growth is expected to slow more by the end of next year as a trade stand-off with China shows no signs of letting up.

Gross domestic product (GDP) will expand at an annualized rate of 2.7 percent this quarter, down from 4.2 percent in the second quarter and 3.5 percent in the third.

GDP growth is then forecast to slow to 2.0-2.5 percent throughout 2019 and then down to 1.8 percent by mid-2020, about half the latest reported rate.

The trade war U.S. President Donald Trump launched with No. 2 world economy China has already started to hit export-sensitive economies like Germany and Japan. And an Asia-Pacific Economic Cooperation summit ended on Sunday with leaders failing to agree on a final statement for first time in the forum's history.

Expectations have lowered that Trump and Chinese President Xi Jinping will make a breakthrough when they meet at a G20 summit later this month.

Economists in the latest poll unanimously said the Fed will raise the federal funds rate by 25 basis points to 2.25-2.50 percent in December.

Twelve respondents in the latest poll said there was a greater than 50 percent chance of a recession in the next two years. But only one, Fathom Consulting, has actually put down a point forecast for GDP to contract in the full year 2020.