A May 13 report from Reuters showed roughly two-thirds of economists predicting two cuts to the U.S. Federal Reserve’s key interest rate, with the first coming in September.
Seventy out of 108 economists surveyed by the media outlet predicted the first reduction in the Fed funds rate in September, bringing it down to a 5-5.25 percent.
Those results were collected during a May 7-13 poll and represent a significant leap in the number of economists forecasting a rate cut this year. In April, approximately half of respondents held that view.
“Although Fed officials have reassured markets its next move will be a cut, insufficient progress bringing inflation down further alongside rising price expectations has stoked some doubts about whether the Fed will move at all this year,” Reuters stated in the report.
Eleven respondents predicted a July rate cut while none expected one in June. In the April survey, respective results were 26 and four.
The Associated Press (AP) said this week that sharp interest rate hikes of the past two years will likely take longer than previously expected to bring down inflation, citing remarks by several Federal Reserve officials.
“A major concern expressed by both Fed policymakers and some economists is that higher borrowing costs aren’t having as much of an impact as economics textbooks would suggest,” AP stated. “Americans as a whole, for example, aren’t spending much more of their incomes on interest payments than they were a few years ago, according to government data, despite the Fed’s sharp rate increases. That means higher rates may not be doing much to limit many Americans’ spending, or cool inflation.”
On May 15, the government will release April’s inflation report, with experts predicting that inflation declined slightly in March to 3.4 percent. It had climbed from 3.1 percent in January,
The Fed’s key rate sits at a 23-year high of 5.3 percent in an effort to bring down inflation, which peaked at 9.1 percent in June 2022, the AP cited.