The vast majority of economists polled predict only a quarter-point drop in interest rates in September; this conclusion contrasts with demands for a massive cut at the upcoming meeting made by many major Wall Street firms.
When the Federal Reserve meets on September 17–18, almost four-fifths of the economists questioned by Bloomberg believe that rates will be trimmed to a range of 5% to 5.25%. The majority of the remaining experts predict a higher cut. There is only a 10% chance, according to the median projection, that rates will be changed before the planned meeting.
Unemployment Rate Spiked
Following a weaker-than-expected jobs report in July, when hiring sharply slowed and the unemployment rate spiked to the highest level in nearly three years, Fed members have retreated from the necessity for strong action.
Concurrently, Fed officials, led by Chair Jerome Powell, have stated that they are continuing to work toward bringing inflation down to their 2% objective but are giving their full employment mandate more weight.
Following the jobs report from last week, a few big Wall Street banks, including JPMorgan Chase & Co. and Citigroup Inc., revised their forecasts, predicting a half-point move next month. In response, futures traders priced in a 100 basis point drop by year’s end, beginning with a 50 basis point cut the next month.
Nevertheless, at meetings in September, November, and December as well as in the first quarter of 2025, experts generally agreed that the Fed would choose to make a smaller, quarter-point adjustment. The 51 economists were polled from August 6–8, following a sell-off in world markets.
Fairly Steady Level
Policymakers hinted they were getting closer to lowering borrowing costs, but they left rates steady two days before the release of the latest jobs statistics. Powell stated that a rate reduction might be suitable as soon as the September meeting of the central bank.
The sluggish job growth has been interpreted by Fed officials as a symptom of a slowing economy rather than a recession. According to Chicago President Austan Goolsbee, growth is still occurring at a “fairly steady level” on Monday.
In the survey, sixty percent of respondents said the labor market was strong but had somewhat softened, and twenty-four percent said it had weakened somewhat but would probably stabilize.
Merely 16% anticipated notable employment losses in the near future. A 46% plurality of economists believe that an intervening step would require a shock, such as malfunction in the credit markets and liquidity issues.
