Fed to cut rates twice this year, starting September – Reuters poll


The U.S. Federal Reserve is expected to implement two interest rate cuts this year, starting in September, according to a majority of forecasters in a recent Reuters poll. This consensus among economists contrasts with market expectations, which have fluctuated between predicting one or two cuts. The shift in market sentiment was influenced by recent data indicating slower economic growth in the last quarter, despite persistent inflation. Fed officials, however, have shown no urgency to cut rates, and some economists anticipate the upcoming “dot plot” projection to indicate fewer rate cuts than previously expected.

Nearly two-thirds of the economists surveyed predict the first rate cut to occur in September, reducing the fed funds rate to a range of 5.00%-5.25%. A smaller group of economists expect only one rate cut this year or none at all, with none foreseeing a cut in the upcoming June policy meeting. The decision to cut rates is seen as a calibrated approach rather than a significant shift in policy stance. Economists believe that as long as the economy remains stable and inflation trends downward, the Fed will proceed with easing rates. However, the ongoing high inflation and tight labor market suggest that achieving the Fed’s 2% inflation target may not happen until at least 2026, making early rate cuts less likely.

Our take (from the Straight to Smart newsletter):

Murky Jobs Data Reveals Fed’s Dilemma

Article Excerpt:

June 5 (Reuters) – The U.S. Federal Reserve will cut its key interest rate in September and once more this year, according to a majority of forecasters in a Reuters poll that also showed a significant risk they opt for only one or none at all.
Economists in Reuters surveys over the past few months have remained consistent in predicting two cuts, unlike markets which until last week were pricing in one, in November, before flipping back to two.

Click to read original Reuters article (subscription may be required):
Reuters poll – Fed to cut rates twice this year

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