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Investing.com – It will likely not hike again, according to a strong majority of economists polled by Reuters, and a slight majority now expect the central bank to wait at least until the end of March before cutting.
This comes in conjunction with the statements of the former President of the United States, Donald Trump, that he will not re-appoint the current US Federal Reserve Governor, Jerome Powell, to his position again if he is re-elected in the upcoming elections to the White House in 2024.
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interest forecast
A Reuters survey revealed; From August 14-18, with the participation of 110 economists; Most of the participating economists expect the US Federal Reserve not to raise interest rates again.
With the world’s largest economy defying nearly every negative forecast, and with unemployment falling to its lowest level in more than five decades, the average probability of a recession within a year has fallen to 40%, the first time it has been below 50% since September 2022.
90% of respondents polled from Aug. 14-18 expected the Fed to keep the federal funds rate in the range of 5.25-5.50% at its September meeting, in line with market expectations. A majority of nearly 80% expect no further rate hikes this year.
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This contrasts with the Fed’s latest minutes on interest rates, which indicate a split over whether another hike is needed. After raising interest rates by 25 basis points last month, Fed Chair Jerome Powell kept the options open as to whether there would be a hike or pause at the September meeting.
“Chair Powell says the decision will come down to upcoming data on growth and inflation, which we suspect will show enough signs of moderation to dissuade the Fed from further rate hikes,” said Sal Guaterie, chief economist at BMO Capital Markets.
“However, the move to lower the current target range of 5.25%-5.50% is unlikely to begin until around June 2024 given the expected slow path for inflation to return to the 2% target,” Guaterie added.
The Fed’s preferred measure of inflation has fallen sharply from a peak of 7.0% after 11 hikes in interest rates from near zero in early 2022. But it is not expected to drop to the 2% target until at least 2025, according to the survey.
Greater confidence that the economy may avoid a major downturn has led to growing expectations that interest rates will remain higher for longer, which has led to turbulence in bond markets in recent days.
23 respondents said the interest would rise again this year, to 5.75-6.00%. Two said there would be two more rate hikes.
While a majority among the 95 economists expect rates to fall at least once by mid-2024, there is no majority on the timing of the first rate cut.
Just over half said the Fed would delay rate cuts until the end of March, as they said the first cut would come in the first quarter.
Meanwhile, 33 of respondents, roughly 35%, expect the Fed to make its first rate cut in the second quarter, and 79 of 95, roughly 83%, expect at least one rate cut by mid-2024.
Trump’s remarks
Donald Trump has announced that he will not choose to reappoint current US Federal Reserve Governor Jerome Powell to his post if he is re-elected in the next election to the White House in 2024.
Trump also added that he was surprised when his successor, current US President Joe Biden, decided to renew Jerome Powell’s term as governor of the US Federal Reserve again after assuming the presidency of the United States.
Trump indicated that he saw that Jerome Powell did not do a good job during his first term in office after he appointed him to his position, and Trump attributed this to the fact that Powell was always late in making his decisions on monetary policy.
Trump said he believed Biden had likely chosen to give Powell another term as chairman of the central bank, because he knew Trump was not in favor of him.
2023-08-21 07:52:00
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