Will the Fed Raise Interest Rates in September, When Is the Rate Cut Coming? Prominent Economists Answered in Major Survey

Wondering about the Fed’s upcoming decisions on interest rates? Get insights from top economists in this comprehensive survey analysis. Find out when the rate cut might happen.

Introduction

In the world of finance and economics, few events generate as much anticipation and speculation as the Federal Reserve’s decisions on interest rates. These decisions have far-reaching implications for businesses, investors, and the general public. In this article, we delve into the insights provided by prominent economists in Reuters’ latest survey, exploring whether the Fed will raise interest rates in September and when a rate cut might be on the horizon.

The Current Outlook

The Federal Reserve’s upcoming policy meeting on September 19-20 is a focal point for economists and market observers. According to Reuters’ survey, the prevailing consensus is that the Fed is likely to maintain its benchmark interest rate during this meeting. The survey, conducted between September 7-12, reveals that over 95% of economists expect the federal funds rate to remain in the current range of 5.25%-5.50%. This suggests a degree of stability in the short term.

However, a notable minority of economists, approximately 20%, anticipate at least one more rate hike before the year’s end. Among them is Brett Ryan, a senior US economist at Deutsche Bank, who believes that while the Fed may keep rates steady in September, it won’t be surprising if officials continue to predict another rate hike in the future.

Current Fed Funds Rate Probabilities – CME

The Labor Market Factor

One of the key indicators that economists are watching is the state of the US labor market. In August, the unemployment rate rose to 3.8%, leading some to believe that the US labor market might be cooling. This provided hope to those opposing an interest rate hike.

However, the Reuters poll predicts a different trajectory. Economists in the survey anticipate that the unemployment rate will average 3.7% for the current year and rise marginally to 4.3% by 2024. This forecast suggests that the labor market might not provide the cooling effect some had hoped for.

Housing Market and Inflation

The US housing market, which experienced a brief correction, is showing signs of recovery. Home prices and rents are expected to remain high, potentially slowing the decline in inflation. In fact, it’s estimated that inflation may not reach the Fed’s target until at least 2025. This expectation hints at a longer timeline before any rate cuts might be considered.

Economist Predictions

Looking ahead, economists participating in the survey shared their predictions for the period until mid-2024. Of these experts, 28 anticipate the first interest rate cut to occur in the first quarter, while 33 predict it will happen in the next quarter. A significant majority, approximately 70% of these participants, believe there will be at least one interest rate cut by the end of next June.

FAQs

Q: When is the Fed’s policy meeting in September? A: The Federal Reserve’s policy meeting is scheduled for September 19-20.

Q: What do economists expect regarding the federal funds rate in the short term? A: Over 95% of economists predict that the Fed will maintain the federal funds rate in the current range of 5.25%-5.50%.

Q: How many economists in the survey expect another rate hike by the end of the year? A: Nearly 20% of economists (17 out of 97) anticipate at least one more rate hike by the end of the year.

Q: What is the predicted trajectory for the US unemployment rate? A: Economists in the survey expect the unemployment rate to average 3.7% for the current year and rise marginally to 4.3% by 2024.

Q: How is the US housing market expected to perform? A: Home prices and rents are expected to remain high, potentially slowing the decline in inflation.

Q: When do economists predict the first interest rate cut? A: Approximately 70% of economists in the survey believe there will be at least one interest rate cut by the end of June in the coming year.

Conclusion

As we await the Federal Reserve’s policy meeting in September, the insights from Reuters’ survey provide valuable perspectives on the potential actions of the Fed. While the consensus suggests a stable interest rate for now, the future remains uncertain, with a significant number of economists anticipating rate changes in the coming quarters. These insights serve as a valuable guide for businesses, investors, and anyone interested in understanding the dynamics of the financial world.

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