Economists expect Fed to ignore jumbo rate cut calls
A large majority of economists surveyed see only a quarter-point decrease in interest rates coming in September — a finding that’s at odds with calls from some large Wall Street banks for a jumbo cut at the next meeting.
Nearly four-fifths of economists surveyed by Bloomberg predict the Federal Reserve will trim rates to a range of 5% to 5.25% at its September 17-18 meeting, with most of the rest predicting a larger reduction. The median forecast shows just 10% odds for a rare move to adjust rates prior to the scheduled gathering.
Fed policymakers have pushed back on the need for aggressive actions following a weaker-than-expected jobs report in July, when hiring slowed markedly and the unemployment rate rose to the highest level in nearly three years.
At the same time, Fed leaders led by Chair Jerome Powell have said they are putting increased weight on their full employment mandate while continuing to strive to reduce inflation to their 2% target.
Some major Wall Street banks, including JPMorgan Chase & Co. and Citigroup Inc., changed their calls after last week’s jobs report to predict a half-point move next month. More broadly, futures investors responded by pricing in a 100-basis-point reduction by the end of the year, starting with a 50-basis-point cut next month.
Yet the consensus among economists was that the Fed would opt for a smaller, quarter-point move at meetings in September, November and December, and in the first quarter of 2025. The 51 economists were surveyed August 6-8 in the wake of a global market selloff.
Calls for a jumbo-sized cut “are overdone and a knee-jerk reaction,” said Ryan Sweet, chief US economist at Oxford Economics. “Historically, the Federal Open Market Committee has delivered
Read more on investmentnews.com
