2023-12-22 12:54:42
Economists predict that the U.S. Federal Reserve will not cut interest rates until mid-2024, contrary to market expectations that the easing cycle will begin earlier.
According to a monthly Bloomberg survey, the median market expectation is that the Fed will cut the benchmark interest rate by 1 percentage point (25 basis points) at the monetary policy meeting in June 2024, followed by three more interest rate cuts in the second half of this year. Since July last year, the benchmark interest rate has been in the range of 5.25% to 5.5%.
A month ago, economists expected the Fed to cut interest rates for the first time in July next year, but another survey conducted before the Fed ended its meeting on December 13 showed that the Fed would cut interest rates for the first time next year in June, indicating that policy Steering has little effect on predictions.
In contrast, investors believe that the probability of the Fed cutting interest rates at or before its March monetary policy meeting is more than 90%, and the main interest rate at the end of next year will be around 3.77%.
Over the past week, however, several Fed officials dismissed speculation that the central bank would cut interest rates in March. At the end of a two-day meeting this month, Fed Chairman Jerome Powell acknowledged that it was appropriate for officials to discuss when to begin easing policy.
The U.S. economy is poised for a soft landing
Bloomberg’s latest survey also showed that economists believe inflation will cool more sharply throughout next year than last month.
Economists lowered their expectations for one of the Fed’s preferred price indicators in the next four quarters by about 0.2 percentage points. The survey shows that the personal consumption expenditures (PCE) price index is now expected to grow by an average of 2.3% next year, compared with last month’s forecast of 2.5%.
Economists predict that the U.S. economy will grow at a strong pace through 2025, supported by the resilience of consumer spending and private investment. Combined with more optimistic job market forecasts, this suggests economists believe the Fed can successfully achieve a so-called soft landing, in which inflation falls without causing massive job losses or a slowdown in the economy.
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