Top economists are predicting the Fed will hike up rates by another quarter percentage point in order to get inflation under control this spring—as long as the banking crisis doesn’t bleed into a full-blown contagion—and then stop the upwards cycle.

Rates are already at their highest in 15 years, having steadily increased from near zero a year ago to 5% after a quarter point hike was announced on March 22. Powell’s decision to make that hike has divided opinion, with some calling it “unnecessary” while others maintained it was entirely predictable.

The Fed has cited persistent inflation for their decision making and has already flagged it may authorize one more hike before leveling off. In February, the inflation rate was 6% year-over-year, down from 6.4% in January and far below the four-decade peak of 9.1% last June. 

Topping out at 5%-5.25%

Economists have said they expect one more raise, putting the interest benchmark at between 5%-5.25%. Speaking to MarketWatch at an event in Washington D.C., Kathy Bostjancic, chief economist at Nationwide bank said: “One more rate hike makes sense, especially if the financial crisis isn’t proliferating.”

The Fed is next expected to meet on May 2 and 3 to discuss interest rates.

She was echoed by Lydia Boussour, senior economist at management consulting company EY-Parthenon, who added: “We are expecting the Fed to hike one more time in May, based on the assumption that the banking situation we’re seeing right now remains fairly contained.”

A source at JPMorgan Chase told Fortune it had a similar outlook, but also teased the much-anticipated easing of rates. They said: “We continue to expect one additional 25bps hike, but this will depend on the stability of the bank situation. With a recession likely beginning in Q3 of this year, we expect the Fed will cut by 50bps in Q4 of 2023.

“While the treasury curve has repriced lower, it still embeds expectations that the Fed will cut by circa 3% by the end of 2024. Should a recession unfold, we see a downside to that number and think there is more room for yields to decline.”

Legendary investor Mark Mobius, the founder of Mobius Capital Partners and well-known money manager, similarly believes rates will go up by one more step, but will not have an overtly negative impact on the economy. Speaking to CNBC he said: “There is no question they are going to continue raising interest rates because the goal of 2% inflation is far away. So, I think we’re in a situation where the economies will do fairly well in spite of the rising interest rates in the U.S.”

The downside

Others expect more rises. Bank of America has also said it expects another hike in May in to slow consumer demand. A memo seen by Fortune adds “the resilience of demand-driven inflation means the Fed might have to raise rates closer to 6% to get inflation back to target”.

This slowdown will trickle back through the economy, Boussour and Bostjancic added at the National Association for Business Economics event. The latter explained: “Eventually small-and-medium-sized firms don’t have the capacity to carry workers if their profits are shrinking and earnings are declining.” She expects around three million people to lose their jobs at an unemployment rate of 5.5% in what she called a “softish landing”.

Boussour was slightly more optimistic, saying she expects the unemployment rate to peak at 4.5% while personal consumption expenditures (PCE) inflation, she believes, will fall below 3% by the end of the year.

Conversely Diane Swonk, chief economist at KPMG, told MarketWatch she hoped the Fed was “done” as the fallout from the banking uncertainty could “sneak up on us”. She said she expects to see no more hikes, “given the spectrum of uncertainty it seems appropriate”.